Doing Business Below the Line: Screening, Mafias and Public Funds

61 Pages Posted: 12 Dec 2018 Last revised: 25 Jun 2019

See all articles by Gianmarco Daniele

Gianmarco Daniele

University of Milan - Faculty of Law; Bocconi University; Bocconi University - Baffi Carefin Centre; Bocconi University

Gemma Dipoppa

Stanford University

Date Written: June 24, 2019

Abstract

Repressive policies to fight against criminal organizations are often met with a violent response from criminal groups. What happens when the state adopts a non-repressive strategy? We evaluate a policy aimed at fighting criminal organizations by targeting their revenues. Since 2013, Italian companies applying for more than 150,000 Euros in public funds undergo a police screening to determine if they have connections to mafias. We exploit this time-varying discontinuity to identify firms self-selecting below the threshold after the law was approved. We observe a large jump in subsidies for values just below the cutoff which cannot be attributed to avoiding bureaucratic costs or investigations for other crimes. Firms sorting are concentrated in mafia affected cities, display worse performances, operate in typical mafia-affected sectors and have balance sheet indicators of money laundering. These firms receive 3.8% of all subsidies assigned in our sample. Our findings shed light on the extent to which mafia-connected firms misappropriate public funds and on the effectiveness of screening policies which apply discontinuously when criminal groups behave strategically.

Suggested Citation

Daniele, Gianmarco and Dipoppa, Gemma, Doing Business Below the Line: Screening, Mafias and Public Funds (June 24, 2019). BAFFI CAREFIN Centre Research Paper No. 2018-98, Available at SSRN: https://ssrn.com/abstract=3299552 or http://dx.doi.org/10.2139/ssrn.3299552

Gianmarco Daniele (Contact Author)

University of Milan - Faculty of Law ( email )

Via Festa del Perdono, 7
20122 Milano
Italy

Bocconi University ( email )

Via Sarfatti 25
Milan, MI 20136
Italy

Bocconi University - Baffi Carefin Centre ( email )

Via Roentgen 1
Milan
Italy

Bocconi University ( email )

Gemma Dipoppa

Stanford University ( email )

Stanford, CA 94305
United States

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