Organized Crime, Migration and Human Capital Formation: Evidence from the South of Italy

The presence of organized crime is a pervasive feature of many developed and developing countries. Even if ‘mafia’ organizations have greatly enlarged the geographical scope of their activities, as in the past they are still deeply rooted in specific territories where their presence generates a host of influences on socio-economic performances (perverse social capital). In this paper we analyse the consequences of the presence of organized crime on the long-term accumulation of human capital, a key determinant of economic growth. To do this we build a unique dataset where - among other information - we identify municipalities where the presence of organized crime is particularly pervasive in an Italian region, Calabria, where is based one of the most powerful international criminal organization, 'Ndrangheta. Our results suggest that the presence of organized crime inhibits the accumulation of human capital both directly (reducing the incentive to invest in formal education) and indirectly by increasing migration outflows.