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Organized crime and business subsidies: Where does the money go?

Listed author(s):
  • Barone, Guglielmo
  • Narciso, Gaia

Business support policies are widespread in advanced countries, to foster employment and productivity. This paper analyses the role of organized crime in the allocation of public subsidies to businesses. We assemble an innovative data set on the Italian mafia at municipality level and test whether mafia-ridden municipalities receive a disproportionally higher amount of funds. We exploit exogenous variation at municipality level to instrument mafia activity and show that the presence of organized crime positively affects the probability of obtaining funding and the amount of public funds. Organized crime is also found to lead to episodes of corruption in the public administration sector. A series of robustness checks confirms the above findings.

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File URL: http://www.sciencedirect.com/science/article/pii/S0094119015000030
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Article provided by Elsevier in its journal Journal of Urban Economics.

Volume (Year): 86 (2015)
Issue (Month): C ()
Pages: 98-110

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Handle: RePEc:eee:juecon:v:86:y:2015:i:c:p:98-110
DOI: 10.1016/j.jue.2015.01.002
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622905

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  1. Guiso, Luigi & Sapienza, Paola & Zingales, Luigi, 2008. "Long Term Persistence," CEPR Discussion Papers 6981, C.E.P.R. Discussion Papers.
  2. Fernanda Brollo & Tommaso Nannicini & Roberto Perotti & Guido Tabellini, 2013. "The Political Resource Curse," American Economic Review, American Economic Association, vol. 103(5), pages 1759-1796, August.
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