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One Kind of Lawlessness: Estimating the Welfare Cost of Somali Piracy

Author

Listed:
  • Tim Besley
  • Thiemo Fetzer
  • Hannes Mueller
Abstract
This paper estimates the effect of piracy attacks on shipping costs using a unique data set on shipping contracts in the dry bulk market. We look at shipping routes whose shortest path exposes them to piracy attacks and find that the increase in attacks in 2008 lead to around a ten percent increase in shipping costs. We use this estimate to get a sense of the welfare loss imposed by piracy. Our intermediate estimate suggests that the creation of $120 million of revenue for pirates in the Somalia area led to a welfare loss of over $1.5 billion.

Suggested Citation

  • Tim Besley & Thiemo Fetzer & Hannes Mueller, 2012. "One Kind of Lawlessness: Estimating the Welfare Cost of Somali Piracy," UFAE and IAE Working Papers 898.12, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
    • Handle: RePEc:aub:autbar:898.12
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    References listed on IDEAS

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    1. Pirates paper of the day
      by UDADISI in UDADISI on 2012-05-12 00:38:00

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    Cited by:

    1. Flückiger, Matthias & Ludwig, Markus, 2015. "Economic shocks in the fisheries sector and maritime piracy," Journal of Development Economics, Elsevier, vol. 114(C), pages 107-125.
    2. Anthony Djaba Sackey & Bernard Lomotey & Abigail Dede Sackey & Raphael Ofosu-Dua Lee & Abraham Akwetey Teye & Richmond Kennedy Quarcoo & John Bansah, 2022. "Delineating the relationship between maritime insecurity and COVID-19 pandemic on West African maritime trade," Journal of Shipping and Trade, Springer, vol. 7(1), pages 1-32, December.
    3. Olaf J. de Groot & Matthew D. Rablen & Anja Shortland, 2012. "Barrgh-gaining with Somali Pirates," Economics of Security Working Paper Series 74, DIW Berlin, German Institute for Economic Research.
    4. Anja Shortland & Federico Varese, 2012. "The Business of Pirate Protection," Economics of Security Working Paper Series 75, DIW Berlin, German Institute for Economic Research.
    5. Konstantina Bountri & Konstantinos Giziakis, 2013. "Modern Maritime Piracy: Countermeasures and Preventive Actions by the Greek Ocean (/deep sea) Shipping Industry," SPOUDAI Journal of Economics and Business, SPOUDAI Journal of Economics and Business, University of Piraeus, vol. 63(3-4), pages 15-25, July.

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    More about this item

    Keywords

    piracy; welfare loss; maritime transport; Somalia; private security; law and order; property rights;
    All these keywords.

    JEL classification:

    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • F1 - International Economics - - Trade
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions

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