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The Spatial Economic Impact of Crime: Evidence from the Construction Sector in Italian Municipalities

Author

Listed:
  • Leonzio Rizzo
  • Massimiliano Ferraresi
  • Riccardo Secomandi

Abstract

Literature has mainly focused on understanding whether organized crime impacts on economic growth, broadly intended. Yet, at the local level, little is known as to how crime may affect economic activities. Using a unique geo-localized dataset on Italian firms, we exploit the strengthening of policy enforcement against corruption to show that when municipalities where the city council is dissolved because of organized-crime infiltration, the construction sector suffers a 7% reduction in the value added of firms located in the same area where the council dissolution occurred. We also find that the effect is larger, the longer the commissioner is present in the municipal council. Taken together our findings suggest that the action of the commissioner depresses the economic activity in the construction sector of the area where the temporary-administered municipality is located, given that it blocks all those relationships with firms related with criminality. This calls for a contemporaneous intervention stimulating public procurements with ‘good’ firms. (JEL codes: K42, D73, R10 and H32)

Suggested Citation

  • Leonzio Rizzo & Massimiliano Ferraresi & Riccardo Secomandi, 2023. "The Spatial Economic Impact of Crime: Evidence from the Construction Sector in Italian Municipalities," CESifo Economic Studies, CESifo Group, vol. 69(3), pages 177-193.
    • Handle: RePEc:oup:cesifo:v:69:y:2023:i:3:p:177-193.
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    File URL: http://hdl.handle.net/10.1093/cesifo/ifad009
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm

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