Organised Crime, Captured Politicians and the Allocation of Public Resources

63 Pages Posted: 25 Feb 2018 Last revised: 11 May 2018

Marco Di Cataldo

London School of Economics & Political Science (LSE), Department of Geography and Environment

Nicola Mastrorocco

Trinity College Dublin

Date Written: April 29, 2018

Abstract

What is the impact of organised crime on the allocation of public resources and on tax collection? This paper studies the consequences of collusion between members of criminal organisations and politicians in Italian local governments. In order to capture the presence of organised crime, we exploit the staggered enforcement of a national law allowing for dissolution of a municipal government upon evidence of collusion between elected officials and the mafia. We measure the consequences of this collusion by using newly collected data on public spending, local taxes and elected politicians at the local level. Differences-in-differences estimates reveal that infiltrated local governments not only spend more on average on construction and waste management and less on police enforcement, but also collect fewer fiscal revenues. In addition, we uncover key elements of local elections associated with mafia-government collusion. In particular, Regression Discontinuity estimates show that infiltration is more likely to occur when right-wing parties win local elections.

Keywords: Organized crime, Elections, Collusions, Public Spending, Italy

JEL Classification: K42; H72; D72

Suggested Citation

Di Cataldo, Marco and Mastrorocco, Nicola, Organised Crime, Captured Politicians and the Allocation of Public Resources (April 29, 2018). Available at SSRN: https://ssrn.com/abstract=3124949 or http://dx.doi.org/10.2139/ssrn.3124949

Marco Di Cataldo

London School of Economics & Political Science (LSE), Department of Geography and Environment ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

Nicola Mastrorocco (Contact Author)

Trinity College Dublin ( email )

Arts Building
Room 3014
Dublin
Ireland

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