In this paper, we study the relationship between organized crime, corruption, and economic growth on a data set from Italianregions for the period 1996–2013. Our working hypothesis is that organized crime can embezzle part of the public expenditureaimed at productive uses by threatening and bribing public officers. To assess the consequences for regional growth we estimatea finite mixture covariate measurement model and find that the relationship between public expenditure and per capita GDP ischaracterized by parameter heterogeneity. Specifically, regions are partitioned in clusters identified by the initial level oforganized crime. The effect of public expenditure on per capita GDP differs across clusters of regions: in the regions with thehigher levels of organized crime public expenditure has a negative effect on per capita GDP, and the estimated share ofembezzled public expenditure is higher, amounting to approximately 10% of its book value. Differently, in the regions withlower levels of organized crime the effect of public expenditure on per capita GDP is positive and the estimated share ofembezzled public expenditure is lower. The empirical analysis is shown to be consistent with a theoretical growth model à laBarro (1990) augmented by corruption orchestrated by organized crime.

Organized Crime, Corruption, and Economic Growth

Fioroni, Tamara
;
2024-01-01

Abstract

In this paper, we study the relationship between organized crime, corruption, and economic growth on a data set from Italianregions for the period 1996–2013. Our working hypothesis is that organized crime can embezzle part of the public expenditureaimed at productive uses by threatening and bribing public officers. To assess the consequences for regional growth we estimatea finite mixture covariate measurement model and find that the relationship between public expenditure and per capita GDP ischaracterized by parameter heterogeneity. Specifically, regions are partitioned in clusters identified by the initial level oforganized crime. The effect of public expenditure on per capita GDP differs across clusters of regions: in the regions with thehigher levels of organized crime public expenditure has a negative effect on per capita GDP, and the estimated share ofembezzled public expenditure is higher, amounting to approximately 10% of its book value. Differently, in the regions withlower levels of organized crime the effect of public expenditure on per capita GDP is positive and the estimated share ofembezzled public expenditure is lower. The empirical analysis is shown to be consistent with a theoretical growth model à laBarro (1990) augmented by corruption orchestrated by organized crime.
2024
bribery
corruption
economic growth
Italian regions
mafia
organized crime
public expenditure
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11562/1149647
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