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Origins of the Sicilian Mafia: The Market for Lemons

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  • Arcangelo Dimico
  • Alessia Isopi
  • Ola Olsson

Abstract

Since its first appearance in the late 1800s, the origins of the Sicilian mafia have remained a largely unresolved mystery. Both institutional and historical explanations have been proposed in the literature through the years. In this paper, we develop an argument for a market structure-hypothesis, contending that mafia arose in towns where firms made unusually high profits due to imperfect competition. We identify the market for citrus fruits as a sector with very high international demand as well as substantial fixed costs that acted as a barrier to entry in many places and secured high profits in others. We argue that the mafia arose out of the need to protect citrus production from predation by thieves. Using the original data from a parliamentary inquiry in 1881-86 on all towns in Sicily, we show that mafia presence is strongly related to the production of orange and lemon. This result contrasts recent work that emphasizes the importance of land reforms and a broadening of property rights as the main reason for the emergence of mafia protection.

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Paper provided by University of Nottingham, CREDIT in its series Discussion Papers with number 12/01.

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Handle: RePEc:not:notcre:12/01

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  1. Frederick van der Ploeg, 2011. "Natural Resources: Curse or Blessing?," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 49(2), pages 366-420, June.
  2. Buonanno, Paolo & Durante, Ruben & Prarolo, Giovanni & Vanin, Paolo, 2011. "On the historical and geographic origins of the Sicilian mafia," MPRA Paper 37009, University Library of Munich, Germany, revised 01 Feb 2012.
  3. Halvor Mehlum & Karl Moene & Ragnar Torvik, 2006. "Institutions and the Resource Curse," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 116(508), pages 1-20, 01.
  4. Smith, Rodney T, 1976. "The Legal and Illegal Markets for Taxed Goods: Pure Theory and an Application to State Government Taxation of Distilled Spirits," Journal of Law and Economics, University of Chicago Press, University of Chicago Press, vol. 19(2), pages 393-429, August.
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Cited by:
  1. Paolo Buonanno & Ruben Durante & Giovanni Prarolo & Paolo Vanin, 2012. "Poor Institutions, Rich Mines: Resource Curse and the Origins of the Sicilian Mafia," Carlo Alberto Notebooks, Collegio Carlo Alberto 261, Collegio Carlo Alberto.
  2. Giuseppe De Feo & Giacomo De Luca, 2013. "Mafia in the ballot box," Working Papers, University of Strathclyde Business School, Department of Economics 1325, University of Strathclyde Business School, Department of Economics.
  3. Paolo Pinotti, 2012. "The Economic Costs of Organized Crime: Evidence from Southern Italy," Working Papers, "Carlo F. Dondena" Centre for Research on Social Dynamics (DONDENA), Università Commerciale Luigi Bocconi 054, "Carlo F. Dondena" Centre for Research on Social Dynamics (DONDENA), Università Commerciale Luigi Bocconi.

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