Cooperation in Criminal Markets

Using a unique data set on organized crime, we examine for the first time the interplay between domestic and foreign criminal organizations in Italy. We find that cooperation between Italian and foreign organizations is strongly associated to activities in which foreign organizations are well placed to supply inputs. Interestingly, this association is stronger in regions home to the headquarters of traditional Italian organizations (incum- bent regions). To mitigate reverse causality concerns, we use a Propensity Score approach. Once these are taken into account, we find that cooperation is higher when crimes are undertaken in incumbent regions and are such that foreign organizations can more easily supply inputs. Using a simple coalitional model we rationalize our results showing that they are consistent with an economic motive coupled with the threat of violence involved in criminal activities.