The Political Economy of Plunder: Economic Opportunity and Modern Piracy

Abstract

In recent years pirate attacks have been increasing in both cost and number. Despite much speculation, there are few empirically tested theories of why we see this variation in attacks. Using an original data-set of over three thousand piracy attacks over the last decade, as well as micro-level data on Somalia, we argue that some of this variation can be attributed to the economic opportunity costs of conducting piracy. By taking advantage of the effect of global commodity data on labor prices, we demonstrate that changes in the prices of labor and capital intensive commodities significantly affect the rate of pirate attacks. These findings are robust to instrumenting for commodity pricing using regional precipitation levels.