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The effect of mafia on public transfers

Author

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  • Guglielmo Barone

    (Bank of Italy)

  • Gaia Narciso

    (Department of Economics, Trinity College Dublin)

Abstract

Organized crime is a worldwide, widespread phenomenon, which affects developing as well as developed countries, and entails deep economic and social consequences. The purpose of this study is to enhance our understanding of organized crime activities. By using an innovative data set on Sicilian mafia activity available at municipality level, we test whether firms located in municipalities with mafia-related crimes obtain more public subsidies. In order to deal with the endogeneity of the relationship, we explore the origins of mafia. We instrument current mafia activity with exogenous historical and geographical shifters of land productivity, i.e. rainfall in the XIX century and geographical features at municipality level. We provide evidence that the presence of mafia affects the allocation of public transfers: municipalities with mafia activity receive larger public funding. The estimated impact of mafia is also economically relevant and equals one standard deviation of the dependent variable. According to our estimates the presence of mafia increases the total amounts of funds by about 35% on average. A series of robustness checks confirms the above findings.

Suggested Citation

  • Guglielmo Barone & Gaia Narciso, 2011. "The effect of mafia on public transfers," Trinity Economics Papers tep2111, Trinity College Dublin, Department of Economics.
    • Handle: RePEc:tcd:tcduee:tep2111
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    References listed on IDEAS

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    1. Paolo Buonanno & Ruben Durante & Giovanni Prarolo & Paolo Vanin, 2015. "Poor Institutions, Rich Mines: Resource Curse in the Origins of the Sicilian Mafia," Economic Journal, Royal Economic Society, vol. 125(586), pages 175-202, August.
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    1. Les liens du 11 mai 2012
      by jcbriquet in Ressources pour économistes on 2012-05-11 16:17:16

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    Cited by:

    1. Scognamiglio, Annalisa, 2018. "When the mafia comes to town," European Journal of Political Economy, Elsevier, vol. 55(C), pages 573-590.
    2. Daniele, Gianmarco, 2019. "Strike one to educate one hundred: Organized crime, political selection and politicians’ ability," Journal of Economic Behavior & Organization, Elsevier, vol. 159(C), pages 650-662.
    3. 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.
    4. Marco Dugato & Francesco Calderoni & Gian Maria Campedelli, 2020. "Measuring Organised Crime Presence at the Municipal Level," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 147(1), pages 237-261, January.
    5. Francesca M. Calamunci, 2022. "What happens in criminal firms after godfather management removal? Judicial administration and firms’ performance," Small Business Economics, Springer, vol. 58(1), pages 565-591, January.
    6. Kyriakos C. Neanidis & Maria Paola Rana, 2014. "Entrepreneurs, Risk Aversion and Dynamic Firms," Centre for Growth and Business Cycle Research Discussion Paper Series 190, Economics, The University of Manchester.
    7. Daniele, Gianmarco & Dipoppa, Gemma, 2017. "Mafia, elections and violence against politicians," Journal of Public Economics, Elsevier, vol. 154(C), pages 10-33.
    8. Alfredo Del Monte, 2016. "Le cause della differente diffusione della criminalit? organizzata nel Mezzogiorno," STUDI ECONOMICI, FrancoAngeli Editore, vol. 2016(118-119-1), pages 271-311.

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    More about this item

    Keywords

    organized crime; public transfers;

    JEL classification:

    • H4 - Public Economics - - Publicly Provided Goods
    • K4 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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