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Organised crime, captured politicians, and the allocation of public resources

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  • Marco Di Cataldo

    (Department of Economics, Ca' Foscari University of Venice; London School of Economics)

  • Nicola Mastrorocco

    (Trinity College Dublin)

Abstract

What is the impact of organised crime on the allocation of public resources and on tax collection? This paper studies the consequences of collusion between members of criminal organisations and politicians in Italian local governments. In order to capture the presence of organised crime, we exploit the staggered enforcement of a national law allowing the dissolution of a municipal government upon evidence of collusion between elected officials and the mafia. We measure the consequences of this infiltration of mafia groups within local governments by using data on public spending, local revenues, and elected politicians at the municipality level. Difference-in-differences estimates reveal that infiltrated local governments spend more on average for construction and waste management, less for municipal police and public transport, and collect fewer taxes for waste and garbage. In addition, we uncover key elements of local elections associated with mafia-government collusion.

Suggested Citation

  • Marco Di Cataldo & Nicola Mastrorocco, 2020. "Organised crime, captured politicians, and the allocation of public resources," Working Papers 2020:04, Department of Economics, University of Venice "Ca' Foscari".
    • Handle: RePEc:ven:wpaper:2020:04
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    More about this item

    Keywords

    Organised crime; collusion; local public finance; municipalities; Italy;
    All these keywords.

    JEL classification:

    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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