Gov-Arrrgh-Nance: Jolly Rogers and Dodgy Rulers

45 Pages Posted: 14 Oct 2010

See all articles by Olaf J. de Groot

Olaf J. de Groot

DIW Berlin; Bocconi University

Anja Shortland

German Institute for Economic Research (DIW Berlin)

Date Written: October 2010

Abstract

In this paper, we argue that the effect of governance on the emergence of crimes of different levels of sophistication is highly non-linear. State failure, anarchy and a lack of infrastructure are not conducive to establishing any business, including illicit enterprises. At the bottom of the spectrum, therefore, both legal business and criminal gangs benefit from improved governance. With further improvements in governance criminal activities decline. We find strong and consistent support for this hypothesis using the International Maritime Bureau's dataset on piracy. Piracy is reported by ship-owners, giving a unique insight into crime in badly governed countries which were systematically excluded from previous analyses. We show that profitable forms of piracy flourish where on the one hand there is stability and infrastructure, but on the other hand the state does not have the capacity to intervene and/or bureaucrats can be bribed to turn a blind eye. For minor acts of theft from ships the pattern is quadratic: piracy first rises and then falls as governance improves.

Keywords: Piracy, illegal behaviour, law enforcement, legal institutions

JEL Classification: K42, P48

Suggested Citation

de Groot, Olaf J. and Shortland, Anja, Gov-Arrrgh-Nance: Jolly Rogers and Dodgy Rulers (October 2010). DIW Berlin Discussion Paper No. 1063. Available at SSRN: https://ssrn.com/abstract=1691559 or http://dx.doi.org/10.2139/ssrn.1691559

Olaf J. De Groot

DIW Berlin ( email )

Mohrenstraße 58
Berlin, 10117
Germany

Bocconi University ( email )

Via Sarfatti, 25
Milan, MI 20136
Italy

Anja Shortland (Contact Author)

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstraße 58
Berlin, 10117
Germany

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