The economic costs of organized crime: evidence from southern Italy

Paolo Pinotti

No 868, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: I examine the post-war economic development of two regions in southern Italy exposed to mafia activity after the 1970s and apply synthetic control methods to estimate their counterfactual economic performance in the absence of organized crime. The synthetic control is a weighted average of other regions less affected by mafia activity that mimics the economic structure and outcomes of the regions of interest several years before the advent of organized crime. The comparison of actual and counterfactual development shows that the presence of mafia lowers the growth path, at the same time as murders increase sharply relative to the synthetic control. Evidence from electricity consumption and growth accounting suggest that lower GDP reflects a net loss of economic activity, due to the substitution of private capital with less productive public investment, rather than a mere reallocation from the official to the unofficial sector.

Keywords: organized crime; economic development; synthetic control methods (search for similar items in EconPapers)
JEL-codes: K4 O17 R11 (search for similar items in EconPapers)
Date: 2012-04
New Economics Papers: this item is included in nep-his, nep-iue and nep-law
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Citations: View citations in EconPapers (39)

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Related works:
Working Paper: The Economic Costs of Organized Crime: Evidence from Southern Italy (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:bdi:wptemi:td_868_12

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