An Unholy Alliance: The Relationship Between Organized Crime and Corruption in Italy

Valentina Chiariello and Oguzhan C. Dincer

No 12474, CESifo Working Paper Series from CESifo

Abstract: We investigate the long-run relationship between organized crime and corruption using data from 20 Italian regions over 30 years. As Rose-Ackerman and Palifka (2018) argue, corruption and organized crime often go together. Our study contributes to the literature in several ways in terms of empirical methodology and specification. We account for integration and cointegration properties of the data and estimate the cointegrating relationship between organized crime and corruption using Fully Modified Ordinary Least Squares (FMOLS), following Pedroni (2000). Our findings are twofold. First, according to our FMOLS estimates, organized crime increases corruption, and this effect becomes stronger as government spending increases. Second, there is bidirectional Granger causality between corruption and organized crime. Our results are robust to alternative specifications and different estimation methods. Overall, our findings point to a persistent and mutually reinforcing relationship between organized crime and corruption, which has significant consequences for implementing anti-corruption policies.

Keywords: corruption; organized crime; Italian regions; panel cointegration; FMOLS; Granger causality (search for similar items in EconPapers)
JEL-codes: D72 D73 H11 K42 (search for similar items in EconPapers)
Date: 2026
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