The Tortuga Disease: The Perverse Effects of Illicit Capital

Forthcoming, International Studies Quarterly

59 Pages Posted: 16 Mar 2013 Last revised: 10 Jun 2016

See all articles by Steven Oliver

Steven Oliver

National University of Singapore (NUS) - Yale-NUS College

Ryan S. Jablonski

London School of Economics & Political Science (LSE) - Department of Government

Justin Hastings

The University of Sydney - School of Social and Political Sciences

Date Written: June 1, 2016

Abstract

Transnational crime brings substantial foreign capital into a number of fragile and developing states. Yet the economic and political impacts of such capital have rarely been studied due to the challenges of obtaining accurate data on illicit activities. We overcome this challenge by compiling a dataset on the amount and disbursement dates of ransom payments made by ship owners and insurers to Somali pirates from 2005 to 2012, along with sub-national commodity prices and trade flows in Somalia. Using a difference-in-differences strategy, we hypothesize and find that ransoms have effects similar to those associated with the Dutch Disease. These effects include appreciating the local currency, decreasing export competitiveness, and increasing import dependence. The results illuminate a new channel through which illicit capital can undermine long-term economic development and foster an economic and political dependency on illicit sectors.

Keywords: Somalia, piracy, maritime, resource curse, political economy, transnational crime

Suggested Citation

Oliver, Steven and Jablonski, Ryan S. and Hastings, Justin, The Tortuga Disease: The Perverse Effects of Illicit Capital (June 1, 2016). Forthcoming, International Studies Quarterly. Available at SSRN: https://ssrn.com/abstract=2233959 or http://dx.doi.org/10.2139/ssrn.2233959

Steven Oliver

National University of Singapore (NUS) - Yale-NUS College ( email )

10 College Avenue West #01-101
Singapore, 138609
Singapore

Ryan S. Jablonski (Contact Author)

London School of Economics & Political Science (LSE) - Department of Government ( email )

London
United Kingdom

HOME PAGE: http://ryanjablonski.wordpress.com

Justin Hastings

The University of Sydney - School of Social and Political Sciences ( email )

Room 140, level 1,
RC Mills Building A26
Sydney, New South Wales 2006
Australia

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