Organized Crime and Firms: Evidence from Italy

56 Pages Posted: 23 Sep 2018 Last revised: 9 Nov 2018

See all articles by Pablo Slutzky

Pablo Slutzky

University of Maryland - Robert H. Smith School of Business

Stefan Zeume

University of Michigan, Stephen M. Ross School of Business

Date Written: October 31, 2018

Abstract

We exploit staggered municipality-level anti-mafia enforcement actions over the 1995-2015 period to study the effect of organized crime on firms. At the municipality level, we find that as the influence of organized crime weakens, competition and innovative activity increase. At the firm level, existing firms that do not exit in response to enforcement actions shrink in size and experience reduced employee productivity and profitability. These results are more pronounced among firms that are treated repeatedly and firms founded during the heydays of the mafia. We also find our results to be stronger for firms in the non-tradable sector, where prices are more likely set locally. Our findings are consistent with accounts of organized crime acting as an enforcer of cartels and using legitimate business to launder money.

Keywords: Organized Crime, Competition, Corruption, Collusion, Barriers to Entry

JEL Classification: G30, G39, K42

Suggested Citation

Slutzky, Pablo and Zeume, Stefan, Organized Crime and Firms: Evidence from Italy (October 31, 2018). Available at SSRN: https://ssrn.com/abstract=3242495 or http://dx.doi.org/10.2139/ssrn.3242495

Pablo Slutzky

University of Maryland - Robert H. Smith School of Business ( email )

College Park, MD 20742-1815
United States

Stefan Zeume (Contact Author)

University of Michigan, Stephen M. Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States

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