Flag choice behaviour in the world merchant fleet

Abstract

Flag selection is not just a crucial decision with regard to ship operation, but also plays an important role in national and international maritime policy. This study uses individual ship registration data to analyse flag selection behaviour, including flagging out decision using a binary choice model, and final flag choice by applying a nested logit model. Operators from traditional maritime countries are found to flag out high-quality vessels, whereas those from open-registry countries tend to flag out low-quality ones. Flag preferences are more sensitive to the registration fee than to the annual due; full-open flags are more elastic than quasi-open ones and substitution among flags within the same group is higher than across different groups. Port State Control, Flag State Control and safety records have opposite impacts on flag choice for ships from closed registry countries and those from open registers.