Economic Factors for Piracy: The Effect of Commodity Price Shocks

This study treats piracy as a civil conflict event where participants are substituting from legal work to illegal activity in response to lower commodity prices (opportunity cost effect). The analysis exploits exogenous variation in nine different commodity prices across seventeen countries around the globe. Results show that as commodity prices decrease maritime piracy attacks increase, which is consistent with results found in civil conflict literature. In the context of actual commodity shocks these piracy attacks represent increases ranging from .452 to 2.59 more attacks per year in the ordinary least squares and .495 to 20.71 attacks per year in the Poisson specification.