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Organized Crime and Economic Growth: Evidence from Municipalities Infiltrated by the Mafia

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  • Alessandra Fenizia
  • Raffaele Saggio

Abstract

This paper studies the long-run economic impact of dismissing city councils infiltrated by organized crime. Applying a matched difference-in-differences design to the universe of Italian social security records, we find that city council dismissals (CCDs) increase employment, the number of firms, and industrial real estate prices. The effects are concentrated in Mafia-dominated sectors and in municipalities where fewer incumbents are reelected. The dismissals generate large economic returns by weakening the Mafia and fostering trust in local institutions. The analysis suggests that CCDs represent an effective intervention for establishing legitimacy and spurring economic activity in areas dominated by organized crime.

Suggested Citation

  • Alessandra Fenizia & Raffaele Saggio, 2024. "Organized Crime and Economic Growth: Evidence from Municipalities Infiltrated by the Mafia," American Economic Review, American Economic Association, vol. 114(7), pages 2171-2200, July.
    • Handle: RePEc:aea:aecrev:v:114:y:2024:i:7:p:2171-2200
    DOI: 10.1257/aer.20221687
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    More about this item

    JEL classification:

    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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