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The Economic Costs of Organized Crime: Evidence from Southern Italy

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  • Paolo Pinotti

Abstract

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.

Suggested Citation

  • Paolo Pinotti, 2012. "The Economic Costs of Organized Crime: Evidence from Southern Italy," Working Papers 054, "Carlo F. Dondena" Centre for Research on Social Dynamics (DONDENA), Università Commerciale Luigi Bocconi.
  • Handle: RePEc:don:donwpa:054
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    Keywords

    organized crime; economic development; synthetic control methods;

    JEL classification:

    • K4 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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