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All is not lost: Organized crime and social capital formation

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  • Buonanno, Paolo
  • Ferrari, Irene
  • Saia, Alessandro

Abstract

We investigate how institutional quality influences social capital by exploiting a policy designed to fight organized crime in Italy: the dismissal of city councils following criminal infiltration into local governments. To measure social capital, we employ a novel, fine-grained indicator based on Italy’s 5 per Mille provision, which allows taxpayers to allocate a portion of their income tax to non-profit organizations. Using a difference-in-differences strategy, we find that city council dismissals lead to a significant increase in social capital. We document that the perceived strengthening of law enforcement is the primary mechanism through which city council dismissals enhance social capital.

Suggested Citation

  • Buonanno, Paolo & Ferrari, Irene & Saia, Alessandro, 2024. "All is not lost: Organized crime and social capital formation," Journal of Public Economics, Elsevier, vol. 240(C).
    • Handle: RePEc:eee:pubeco:v:240:y:2024:i:c:s0047272724001932
    DOI: 10.1016/j.jpubeco.2024.105257
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    More about this item

    Keywords

    Organized crime; Social capital; Italy; 5 per Mille;
    All these keywords.

    JEL classification:

    • A13 - General Economics and Teaching - - General Economics - - - Relation of Economics to Social Values
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • Z18 - Other Special Topics - - Cultural Economics - - - Public Policy

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