Organized Crime and Economic Growth: Evidence from Municipalities Infiltrated by the Mafia

Alessandra Fenizia and Raffaele Saggio

American Economic Review, 2024, vol. 114, issue 7, 2171-2200

Abstract: This paper studies the long-run economic impact of dismissing city councils infiltrated by organized crime. Applying a matched difference-in-differences design to the universe of Italian social security records, we find that city council dismissals (CCDs) increase employment, the number of firms, and industrial real estate prices. The effects are concentrated in Mafia-dominated sectors and in municipalities where fewer incumbents are reelected. The dismissals generate large economic returns by weakening the Mafia and fostering trust in local institutions. The analysis suggests that CCDs represent an effective intervention for establishing legitimacy and spurring economic activity in areas dominated by organized crime.

JEL-codes: D73 H77 K42 R11 R23 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1257/aer.20221687

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