The macroeconomic impact of organized crime: a neo-Kaleckian perspective
AbstractThe paper analyzes how organized crime aﬀects the economy through its impact on the eﬀective demand, following the Neo-Kaleckian approach. From this perspective, the presence of organized crime, on the one hand, tends to reduce the eﬀective demand draining resources through extortion, bribery of public oﬃcials and encouraging consumption of criminal goods (illegal goods and goods produced in the underground economy), on the other hand, tends to increase the eﬀective demand using the proceeds of criminal activity in the purchase of legal consumption and investment goods. The model highlights the opposing action of these two forces and identiﬁes the conditions for a negative impact on the degree of capacity utilization and the growth rate. For the latter, these conditions tend to be more stringent, due to the direct impact of organized crime on investment decisions. Overall, the operation of organized crime tends to negatively inﬂuence the economic activity to the extent that the income drained from the legal sector is not reused into the same sector.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 40077.
Date of creation: Jul 2012
Date of revision:
Neo-Kaleckian; macroeconomics; organized crime; illegal or illicit markets;
Find related papers by JEL classification:
- E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian
- E2 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment
- O17 - Economic Development, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
- K4 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-07-23 (All new papers)
- NEP-IUE-2012-07-23 (Informal & Underground Economics)
- NEP-MAC-2012-07-23 (Macroeconomics)
- NEP-PKE-2012-07-23 (Post Keynesian Economics)
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