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The Effect of Mafia on Public Transfers

  • Guglielmo Barone

    ()

    (Economic Research Department, Branch of Bologna, Bank of Italy, Italy; RCEA, Italy)

  • Gaia Narciso

    ()

    (Department of Economics, Trinity College Dublin, Ireland; CReAM, UK; IIIS, Ireland)

Organised crime is widely regarded as damaging to economic outcomes. This paper analyses the impact of organized crime on the allocation of public subsidies to businesses. We assemble an innovative data set on Italian mafia at municipality level and test whether mafia diverts public funding. We exploit exogenous variation at municipality level to instrument mafia activity and show that the presence of organized crime positively affects the probability of obtaining funding and the amount of public funds. Mafia is also found to lead to episodes of corruption in the public administration sector. A series of robustness checks confirms the above findings.

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Paper provided by The Rimini Centre for Economic Analysis in its series Working Paper Series with number 34_13.

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Date of creation: Jun 2013
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Handle: RePEc:rim:rimwps:34_13
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  1. Bronzini, Raffaello & de Blasio, Guido, 2006. "Evaluating the impact of investment incentives: The case of Italy's Law 488/1992," Journal of Urban Economics, Elsevier, vol. 60(2), pages 327-349, September.
  2. Durante, Ruben, 2009. "Risk, Cooperation and the Economic Origins of Social Trust: an Empirical Investigation," MPRA Paper 25887, University Library of Munich, Germany.
  3. Mendelsohn, Robert & Nordhaus, William D & Shaw, Daigee, 1994. "The Impact of Global Warming on Agriculture: A Ricardian Analysis," American Economic Review, American Economic Association, vol. 84(4), pages 753-71, September.
  4. Oriana Bandiera, 2003. "Land Reform, the Market for Protection, and the Origins of the Sicilian Mafia: Theory and Evidence," Journal of Law, Economics and Organization, Oxford University Press, vol. 19(1), pages 218-244, April.
  5. Fernanda Brollo & Tommaso Nannicini & Roberto Perotti & Guido Tabellini, 2010. "The Political Resource Curse," NBER Working Papers 15705, National Bureau of Economic Research, Inc.
  6. Emilia Bonaccorsi di Patti, 2009. "Weak institutions and credit availability: the impact of crime on bank loans," Questioni di Economia e Finanza (Occasional Papers) 52, Bank of Italy, Economic Research and International Relations Area.
  7. Marcelo J. Moreira, 2003. "A Conditional Likelihood Ratio Test for Structural Models," Econometrica, Econometric Society, vol. 71(4), pages 1027-1048, 07.
  8. Buonanno, Paolo & Durante, Ruben & Prarolo, Giovanni & Vanin, Paolo, 2011. "On the historical and geographic origins of the Sicilian mafia," MPRA Paper 37009, University Library of Munich, Germany, revised 01 Feb 2012.
  9. Alberto Abadie & Javier Gardeazabal, 2003. "The Economic Costs of Conflict: A Case Study of the Basque Country," American Economic Review, American Economic Association, vol. 93(1), pages 113-132, March.
  10. Michael P. Murray, 2006. "Avoiding Invalid Instruments and Coping with Weak Instruments," Journal of Economic Perspectives, American Economic Association, vol. 20(4), pages 111-132, Fall.
  11. Paolo Buonanno & Ruben Durante & Giovanni Prarolo & Paolo Vanin, 2012. "Poor Institutions, Rich Mines: Resource Curse and the Origins of the Sicilian Mafia," Carlo Alberto Notebooks 261, Collegio Carlo Alberto.
  12. 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.
  13. Bernini, Cristina & Pellegrini, Guido, 2011. "How are growth and productivity in private firms affected by public subsidy? Evidence from a regional policy," Regional Science and Urban Economics, Elsevier, vol. 41(3), pages 253-265, May.
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