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When the mafia comes to town

Annalisa Scognamiglio

European Journal of Political Economy, 2018, vol. 55, issue C, 573-590

Abstract: This paper investigates the diffusion of organized crime in new areas by examining a legal practice in effect in Italy between 1956 and 1988, namely the power for the authorities to force mafiosi to relocate to another town. Using the variation in the number of relocated mafia members according to destination provinces in a difference-in-differences setting, I find no conclusive evidence on crime and a very robust positive impact on employment in the construction industry. I show that the effect is driven primarily by provinces that had a low ex-ante level of financial development, suggesting that mafias take advantage of investment opportunities in the construction sector that are left unexploited due to liquidity constraints.

Keywords: Organized crime; Law making; Shadow economy (search for similar items in EconPapers)
JEL-codes: K42 O17 (search for similar items in EconPapers)
Date: 2018
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Handle: RePEc:eee:poleco:v:55:y:2018:i:c:p:573-590