Organised Crime, Captured Politicians and the Allocation of Public Resources
77 Pages Posted: 25 Feb 2018 Last revised: 9 Jan 2019
Date Written: January 3, 2019
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: Suggested Citation