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The Tortuga disease: the perverse effects of illicit foreign capital

Jablonski, Ryan S. and Oliver, Steven and Hastings, Justin V. (2017) The Tortuga disease: the perverse effects of illicit foreign capital. International Studies Quarterly, 61 (2). pp. 312-327. ISSN 0020-8833

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Identification Number: 10.1093/isq/sqw051

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.

Item Type: Article
Official URL: https://academic.oup.com/isq
Additional Information: © 2017 The Authors. Published by Oxford University Press on behalf of the International Studies Association.
Subjects: H Social Sciences > HC Economic History and Conditions
H Social Sciences > HG Finance
Sets: Departments > Government
Date Deposited: 12 Jul 2016 10:33
Last Modified: 01 Dec 2017 08:53
URI: http://eprints.lse.ac.uk/id/eprint/67105

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