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  4. August 2022
  5. The Economic Effects of Mafia: Firm Level Evidence

The Economic Effects of Mafia: Firm Level Evidence

  • Litterio Mirenda
  • Sauro Mocetti
  • Lucia Rizzica
American Economic Review
vol. 112, no. 8, August 2022
(pp. 2748-73)
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Abstract

We analyze the effects of Mafia infiltration in the legal economy. Combining information from investigative records with panel data on firms' governance and balance sheets, we build an indicator of infiltration in firms located in an area with no tradition of Mafia. We show that Mafia targets young and less efficient firms and that infiltration generates a significant rise in firms' revenues, with no proportionate growth in production inputs and a deterioration of the firm's financial situation leading to market exit. These findings are consistent with a story of predatory behavior in which infiltration is used for money laundering or rent extraction.

Citation

Mirenda, Litterio, Sauro Mocetti, and Lucia Rizzica. 2022. "The Economic Effects of Mafia: Firm Level Evidence." American Economic Review, 112 (8): 2748-73. DOI: 10.1257/aer.20201015

Additional Materials

JEL Classification

  • D22 Firm Behavior: Empirical Analysis
  • G32 Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
  • G34 Mergers; Acquisitions; Restructuring; Voting; Proxy Contests; Corporate Governance
  • K42 Illegal Behavior and the Enforcement of Law
  • L25 Firm Performance: Size, Diversification, and Scope