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The Economic Costs of Organized Crime: Evidence from Southern Italy


I examine the post-war economic development of two regions in southern Italy exposed to mafia activity after the 1970s and apply synthetic control methods to estimate their counterfactual economic performance in the absence of organized crime. The synthetic control is a weighted average of other regions less affected by mafia activity that mimics the economic structure and outcomes of the regions of interest several years before the advent of organized crime. The comparison of actual and counterfactual development shows that the presence of mafia lowers GDP per capita by 16%, at the same time as murders increase sharply relative to the synthetic control. Evidence from electricity consumption and growth accounting suggests that lower GDP reflects a net loss of economic activity, due to the substitution of private capital with less productive public investment, rather than a mere reallocation from the official to the unoficial sector.

Keywords: organized crime, economic development, synthetic control methods.

Paolo Pinotti
Short bio: 

Paolo Pinotti is Assistant Professor of Economics at Bocconi University, in the Department of Policy Analysis and Public Management. He got a Ph.D. in economics from Universitat Pompeu Fabra in 2009 and worked at the research department of the Bank of Italy from 2007 to 2011. He published papers in applied econometrics, political economy, the economics of crime and immigration, and served as the main investigator for various research projects commissioned by national and international research institutes and organizations, including the Italian Antimafia Commission.

23 January 2013 - 11:00

The presentation will be in English.