Organized Crime, Corruption and Economic Growth

Tamara Fioroni, Andrea Lavezzi and Giovanni Trovato

Discussion Papers from Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy

Abstract: In this paper we study the relationship between organized crime, corruption and economic growth. To shed light on this nexus, we propose a growth model in which organized crime can embezzle public spending by corrupting and threatening public officers. Then we bring the empirical implications of the model to data from Italian regions, as stylized facts show that less developed regions are characterized by the highest levels of corruption and of presence of criminal organizations of Mafia-type. Our main findings are: i) the per capita GDP dynamics of Italian regions in the period considered is characterized by multiple regimes identified by the initial level of organized crime, a finding consistent with a multiple steady state growth dynamics (e.g. Durlauf and Johnson, 1995); ii) in the regions with the higher levels of organized crime the estimated share of embezzled public expenditure is higher and, moreover, public expenditure has a negative effect on per capita GDP. Differently, in the regions with lower levels of organized crime the estimated share of embezzled public expenditure is lower and the effect of public expenditure on per capita income is positive.

Keywords: Corruption; Organized crime; Economic growth; Public expenditure (search for similar items in EconPapers)
JEL-codes: K42 O17 O23 R11 (search for similar items in EconPapers)
Date: 2023-07-01
New Economics Papers: this item is included in nep-gro, nep-law and nep-ure
Note: ISSN 2039-1854
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Persistent link: https://EconPapers.repec.org/RePEc:pie:dsedps:2023/298

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