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Organized crime and business subsidies: Where does the money go?

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  • Barone, Guglielmo
  • Narciso, Gaia

Abstract

Business support policies are widespread in advanced countries, to foster employment and productivity. This paper analyses the role of organized crime in the allocation of public subsidies to businesses. We assemble an innovative data set on the Italian mafia at municipality level and test whether mafia-ridden municipalities receive a disproportionally higher amount of funds. We exploit exogenous variation at municipality level to instrument mafia activity and show that the presence of organized crime positively affects the probability of obtaining funding and the amount of public funds. Organized crime is also found to lead to episodes of corruption in the public administration sector. A series of robustness checks confirms the above findings.

Suggested Citation

  • Barone, Guglielmo & Narciso, Gaia, 2015. "Organized crime and business subsidies: Where does the money go?," Journal of Urban Economics, Elsevier, vol. 86(C), pages 98-110.
    • Handle: RePEc:eee:juecon:v:86:y:2015:i:c:p:98-110
    DOI: 10.1016/j.jue.2015.01.002
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    More about this item

    Keywords

    Business subsidies; Organized crime; Public transfers; Corruption;
    All these keywords.

    JEL classification:

    • H4 - Public Economics - - Publicly Provided Goods
    • K4 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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