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Decentralization, institutions, and maritime piracy

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Abstract

Piracy is an organized crime that is not politically motivated; however, piracy has been linked consistently to the political environment and the quality of national institutions. Provincial governance considerations and spatial aspects may influence the emergence and sustainability of piratical activities. Unlike the extant literature, we investigate the impact of fiscal and political decentralization on the incidence of piracy, while accounting for the average distance to the coast of the nearest region to the pirate incident. Fiscal decentralization generally serves as a deterrent to piracy, while political decentralization may encourage or inhibit piracy. Political decentralization may deter piracy by providing policy ownership to local officials. Alternatively, decentralization may foster piracy by inhibiting interjurisdictional competition or by separating local governance from the national seat of power. In general, enhanced institutional quality limits piracy at both national and regional levels.

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Notes

  1. Smaller and more numerous bottom governing tiers can limit anti-piracy coordination if regions pool policing resources. Hence, the influence of the size of the bottom governing tiers on piracy is not unequivocal and must be empirically tested.

  2. Measurement error in the dependent variable might be an issue to the extent that some piracy cases go unreported. Unfortunately, we are not aware of a piracy dataset that is immune to this potential issue.

  3. Our first-stage regression results show that population density in 1500 has a negative and statistically significant effect on current institutions, confirming that the instrument is valid. This is similar to the findings by Acemoglu et al. (2002). They provide convincing arguments that differences in population density in 1500 among former colonies explain the different types of institutions that emerged in those countries. In sparsely populated locations, European colonizers were able or encouraged to settle in large numbers and introduce pro-development institutions. In densely populated areas, however, it was profitable for colonial powers to either maintain existing or introduce new extractive institutions. These “institutions of private property” and “extractive institutions” persisted over time till the present. For the excludability restriction, we assume that population density in 1500 is exogenous and its impact on piracy channels through institutions.

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Acknowledgments

This paper has profited from comments from William F. Shughart II and an anonymous referee. The authors’ research was supported by the Vibhooti Shukla Endowment.

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Authors and Affiliations

  1. Department of Economics, American University of Sharjah, Sharjah, UAE

    Khusrav Gaibulloev

  2. Department of Economics, School of Economic, Political & Policy Sciences, University of Texas at Dallas, 800 W Campbell Road, Richardson, TX, 75080, USA

    Todd Sandler

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  1. Khusrav Gaibulloev
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Correspondence to Todd Sandler.

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Gaibulloev, K., Sandler, T. Decentralization, institutions, and maritime piracy. Public Choice 169, 357–374 (2016). https://doi.org/10.1007/s11127-016-0346-3

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