Where has the Rum gone? : firms' choice of transport mode under the threat of maritime piracy

Despite a general agreement that piracy poses a significant threat to maritime shipping, empirical evidence regarding its economic consequences remains scarce. This paper takes a step towards filling the gap by combining firm-level Chinese customs data with information on pirate attacks to investigate how exporting firms respond to maritime piracy. It finds that overall exports along a particular shipping route fall following an increase in pirate activity. In addition, piracy induces firms to switch from ocean to air shipping, while the remaining ocean shipments become larger.