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The welfare cost of lawlessness : evidence from Somali piracy

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Besley, Timothy, Fetzer, Thiemo and Mueller, Hannes (2015) The welfare cost of lawlessness : evidence from Somali piracy. Journal of the European Economic Association, 13 (2). pp. 203-239. doi:10.1111/jeea.12114 ISSN 1542-4766.

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Official URL: http://dx.doi.org/10.1111/jeea.12114

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Abstract

In spite of general agreement that establishing the rule of law is central to properly functioning economies, little is known about the cost of law and order breakdowns. This paper studies a specific context of this by estimating the effect of Somali piracy attacks on shipping costs using data on shipping contracts in the dry bulk market. To estimate the effect of piracy, we look at shipping routes whose shortest path exposes them to piracy and find that the increase in attacks in 2008 led to around an 8% to 12% increase in costs. From this we calculate the welfare loss imposed by piracy. We estimate that generating around 120 USD million of revenue for Somali pirates led to a welfare loss in excess of 630 USD million, making piracy an expensive way of making transfers.

Item Type: Journal Article
Subjects: G Geography. Anthropology. Recreation > G Geography (General)
H Social Sciences > HE Transportation and Communications
Q Science > QA Mathematics
Divisions: Faculty of Social Sciences > Economics
Library of Congress Subject Headings (LCSH): Shipping, Pirates -- Somali -- Economic aspects, Piracy -- Mathematical models
Journal or Publication Title: Journal of the European Economic Association
Publisher: Oxford University Press
ISSN: 1542-4766
Official Date: 1 April 2015
Dates:
DateEvent
1 April 2015Published
25 March 2015Available
15 April 2014Accepted
Volume: 13
Number: 2
Page Range: pp. 203-239
DOI: 10.1111/jeea.12114
Status: Peer Reviewed
Publication Status: Published
Access rights to Published version: Restricted or Subscription Access
Date of first compliant deposit: 19 July 2018
Date of first compliant Open Access: 19 July 2018
RIOXX Funder/Project Grant:
Project/Grant IDRIOXX Funder NameFunder ID
ECO2012-37857[MINECO] Ministerio de Economía y Competitividadhttp://dx.doi.org/10.13039/501100003329
Ramon y Cajal programme[MINECO] Ministerio de Economía y Competitividadhttp://dx.doi.org/10.13039/501100003329

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