Organized Crime and Firms: Evidence from Italy

60 Pages Posted: 23 Sep 2018 Last revised: 26 Jan 2019

See all articles by Pablo Slutzky

Pablo Slutzky

University of Maryland - Robert H. Smith School of Business

Stefan Zeume

University of Illinois at Urbana-Champaign

Date Written: January 25, 2019

Abstract

We employ staggered municipality-level anti-mafia enforcement actions over the 1995-2015 period in Italy to study the effect of organized crime on firms. At the municipality level, we find that as the influence of organized crime weakens, competition among firms, innovation activity, and competition for public procurement contracts increase. At the firm level, firms that do not exit in response to anti-mafia enforcement actions shrink in size and experience a decline in employee productivity, as well as a slight reduction in profitability. These results are more pronounced for firms that are treated by multiple anti-mafia enforcement actions, firms founded during the height of mafia activity, and firms that operate in the non-tradable sector. Our findings are consistent with accounts of organized crime members acting as cartel enforcers and using legitimate firms 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 (January 25, 2019). 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 Illinois at Urbana-Champaign ( email )

1206 South Sixth Street
Champaign, IL 61820
United States

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