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Private States and the Enforcement of Property Rights - Theory and Evidence on the Origins of the Sicilian Mafia

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  • Bandiera, Oriana

Abstract

Historical records show that the Sicilian mafia initially developed to protect land from predatory attacks, at a time when publicly provided security was scarce and banditry widespread. Using a common-agency model, the Paper shows that: (i) it is optimal for each landowner to voluntarily buy protection even if this results in a worse equilibrium for the landowning class as a whole and (ii) other things equal, mafia profits are higher where land is more fragmented. The argument is based on the fact that protection involves an externality because by buying protection each landowner deflects thieves on others’ properties. Because of the externality, for each landlord protection is more valuable if they are one of the few to receive it, thus each landlord will be willing to pay more if some landlords are left out. Land fragmentation increases the number of landlords who would pay to keep some out, which in turn increases mafia’s profits. Using qualitative data from a parliamentary survey (1881), the Paper also shows that in 19th century rural Sicily mafia was in fact more likely to be active in towns were land was more divided.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3123.

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Date of creation: Jan 2002
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Handle: RePEc:cpr:ceprdp:3123

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Keywords: common agency; property rights enforcement; protection; scicily-history;

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  1. Frye, Timothy & Zhuravskaya, Ekaterina, 2000. "Rackets, Regulation, and the Rule of Law," Journal of Law, Economics and Organization, Oxford University Press, Oxford University Press, vol. 16(2), pages 478-502, October.
  2. de Meza, David & Gould, J R, 1992. "The Social Efficiency of Private Decisions to Enforce Property Rights," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 100(3), pages 561-80, June.
  3. Bernheim, B Douglas & Whinston, Michael D, 1986. "Menu Auctions, Resource Allocation, and Economic Influence," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 101(1), pages 1-31, February.
  4. Skaperdas, S. & Syropoulos, C., 1993. "Gangs as Primitive States," Papers, California Irvine - School of Social Sciences 92-93-13, California Irvine - School of Social Sciences.
  5. Moselle, Boaz & Polak, Benjamin, 2001. "A Model of a Predatory State," Journal of Law, Economics and Organization, Oxford University Press, Oxford University Press, vol. 17(1), pages 1-33, April.
  6. Laussel, Didier & Le Breton, Michel, 2001. "Conflict and Cooperation: The Structure of Equilibrium Payoffs in Common Agency," Journal of Economic Theory, Elsevier, vol. 100(1), pages 93-128, September.
  7. Braguinsky, Serguey, 1999. "Enforcement of Property Rights during the Russian Transition: Problems and Some Approaches to a New Liberal Solution," The Journal of Legal Studies, University of Chicago Press, University of Chicago Press, vol. 28(2), pages 515-44, June.
  8. Grossman, Herschel I., 2002. ""Make us a king": anarchy, predation, and the state," European Journal of Political Economy, Elsevier, vol. 18(1), pages 31-46, March.
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