The Political Economy of Plunder

Abstract

Maritime piracy is a growing scourge on the international community—imposing large costs on maritime states and the shipping industry, as well as potentially undermining state capacity and funding terrorism. Using original data on over 3,000 pirate attacks, the authors argue that these attacks are, in part, a response to poor labor market opportunities. To establish this, the authors take advantage of the strong effect of commodity prices on labor market opportunities in piracy-prone states. Consistent with this theory, the authors show that changes in the price of labor- and capital-intensive commodities have consistent and strong effects on the number of pirate attacks in a country’s territorial waters each month. The authors confirm these results by instrumenting for commodity prices using monthly precipitation levels.