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How Costly is Modern Maritime Piracy to the International Community?

Authors

  • Sami Bensassi,

    Corresponding author
    1. Universitat Jaume 1, Spain
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  • Inmaculada Martínez-Zarzoso

    Corresponding author
    1. University of Goettingen, Spain
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    • We wish to thank the editor and two referees as well as participants at the IAME conference held in Lisbon in 2010, the GECC conference held in Berlin in 2011 and the CSAE conference held in Oxford in 2011 for their fruitful comments and suggestions. Financial support from the Robert Bosch Stiftung (Fast Track Program) and the Spanish Ministry of Science and Technology is gratefully acknowledged (ECO 2010-15863).


Bensassi: Universitat Jaume 1, Castellon de la Plana, Castellon, 12075, Spain. Tel: 0034-964-728-590; Fax: 0034-964-728-591; E-mail: bensassi@eco.uji.es. Martínez-Zarzoso: University of Goettingen, Goettingen, Germany and Universitat Jaume 1, Castellon de la Plana, Castellon, 12075, Spain. Tel: 0049-551-397-350; Fax: 0049-551-397-279; E-mail: martinei@eco.uji.es.

Abstract

This paper focuses on the impact of maritime piracy on international trade. Piracy increases the cost of international maritime transport through an increase in insecurity regarding goods deliveries. Bilateral trade flows between the main European and Asian countries over the 1999 to 2008 period are used to estimate an augmented gravity model that includes various measures of piracy acts. We found robust evidence indicating that maritime piracy reduces the volume of trade; the effect of 10 additional vessels hijacked being associated to an 11% decrease in exports. Consequently, the current cost of piracy in terms of international trade destruction is estimated at 24.5 billion dollars.

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