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The macroeconomic impact of organized crime: a neo-Kaleckian perspective

Author

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  • Capuano, Carlo
  • Purificato, Francesco

Abstract

The paper analyzes how organized crime affects the economy through its impact on the effective demand, following the Neo-Kaleckian approach. From this perspective, the presence of organized crime, on the one hand, tends to reduce the effective demand draining resources through extortion, bribery of public officials and encouraging consumption of criminal goods (illegal goods and goods produced in the underground economy), on the other hand, tends to increase the effective demand using the proceeds of criminal activity in the purchase of legal consumption and investment goods. The model highlights the opposing action of these two forces and identifies the conditions for a negative impact on the degree of capacity utilization and the growth rate. For the latter, these conditions tend to be more stringent, due to the direct impact of organized crime on investment decisions. Overall, the operation of organized crime tends to negatively influence the economic activity to the extent that the income drained from the legal sector is not reused into the same sector.

Suggested Citation

  • Capuano, Carlo & Purificato, Francesco, 2012. "The macroeconomic impact of organized crime: a neo-Kaleckian perspective," MPRA Paper 40077, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:40077
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    File URL: https://mpra.ub.uni-muenchen.de/40077/1/MPRA_paper_40077.pdf
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    References listed on IDEAS

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    1. Paolo Buonanno & Daniel Montolio & Paolo Vanin, 2009. "Does Social Capital Reduce Crime?," Journal of Law and Economics, University of Chicago Press, vol. 52(1), pages 145-170, February.
    2. Anderson, David A, 1999. "The Aggregate Burden of Crime," Journal of Law and Economics, University of Chicago Press, vol. 42(2), pages 611-642, October.
    3. Antonio Acconcia & Claudia Cantabene, 2008. "A Big Push To Deter Corruption:Evidence From Italy," Giornale degli Economisti, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, vol. 67(1), pages 75-102, March.
    4. M. Centorrino & F. Ofria, 2008. "Organized crime and labour productivity in the Mezzogiorno: an application of the "Kaldor-Verdoorn" model," Rivista economica del Mezzogiorno, Società editrice il Mulino, issue 1, pages 163-188.
    5. V. Daniele & U. Marani, 2008. "The effect of organized crime on foreign investments: an empirical analysis for the Italian Provinces," Rivista economica del Mezzogiorno, Società editrice il Mulino, issue 1, pages 189-218.
    6. Peri Giovanni, 2004. "Socio-Cultural Variables and Economic Success: Evidence from Italian Provinces 1951-1991," The B.E. Journal of Macroeconomics, De Gruyter, vol. 4(1), pages 1-36, September.
    7. Stergios Skaperdas, 2001. "The political economy of organized crime: providing protection when the state does not," Economics of Governance, Springer, vol. 2(3), pages 173-202, November.
    8. 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.
    9. Del Monte, Alfredo & Papagni, Erasmo, 2007. "The determinants of corruption in Italy: Regional panel data analysis," European Journal of Political Economy, Elsevier, vol. 23(2), pages 379-396, June.
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    11. Vittorio, Daniele, 2009. "Organized crime and regional development. A review of the Italian case," MPRA Paper 16547, University Library of Munich, Germany.
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    Citations

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    Cited by:

    1. Slim, Sadri, 2015. "Un modelo Mundell-Fleming con economía ilegal y lavado de dinero
      [Modeling illegal economy and money laundering: a Mundell-Fleming framework]
      ," MPRA Paper 64675, University Library of Munich, Germany.
    2. Wallace, Rodrick & Fullilove, Robert E., 2014. "State policy and the political economy of criminal enterprise: mass incarceration and persistent organized hyperviolence in the USA," Structural Change and Economic Dynamics, Elsevier, vol. 31(C), pages 17-31.

    More about this item

    Keywords

    Neo-Kaleckian; macroeconomics; organized crime; illegal or illicit markets;

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian
    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • K4 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior

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