On the Unintended Effects of Public Transfers: Evidence from EU Funding to Southern Italy

Abstract

We study the relationship between the accrual of large financial transfers from a central level of government and the incidence of white collar crimes against public administration and public faith at the local level. We analyse the case of EU funding to Southern Italy and make use of within-municipality variation in the flow of funds between 2007 and 2014. We find a statistically significant effect of transfers on white collar crimes: our estimates suggest that in the absence of EU funding disbursements, the annual number of white collar crimes in Southern Italy would have been 4 per cent lower. We acknowledge that the evidence we provide cannot be taken as fully conclusive given the possible simultaneity of criminal activities and funding assignments and disbursements. Nevertheless, we provide evidence that the correlations we estimated between transfers and white collar crimes are unlikely to be spurious or due to confounding effects.

Keywords: regional transfers, white collar crimes, EU funds

JEL Classification: D7, H3, H7