Organized Crime and Firms: Evidence from Italy
56 Pages Posted: 23 Sep 2018 Last revised: 9 Nov 2018
Date Written: October 31, 2018
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: Suggested Citation