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The Economic Costs of Organized Crime: Evidence from Southern Italy

  • Paolo Pinotti

I examine the post-war economic development of two regions in southern Italy exposed to ma a activity after the 1970s and apply synthetic control methods to estimate their counterfactual economic performance in the absence of organized crime. The synthetic control is a weighted average of other regions less a ected by ma a activity that mimics the economic structure and outcomes of the regions of interest several years before the advent of organized crime. The comparison of actual and counterfactual development shows that the presence of ma a lowers GDP per capita by 16%, at the same time as murders increase sharply relative to the synthetic control. Evidence from electricity consumption and growth accounting suggests that lower GDP re ects a net loss of economic activity, due to the substitution of private capital with less productive public investment, rather than a mere reallocation from the ocial to the unocial sector.

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Paper provided by "Carlo F. Dondena" Centre for Research on Social Dynamics (DONDENA), Università Commerciale Luigi Bocconi in its series Working Papers with number 054.

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Length: 30 pages
Date of creation: Sep 2012
Date of revision:
Handle: RePEc:don:donwpa:054
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