Fighting Organized Crime by Targeting their Revenue: Screening, Mafias, and Public Funds

Abstract

Repressive policies to fight criminal organizations are often met with a violent response from criminal groups. Are non-repressive strategies more effective? Targeting criminal revenues can be a powerful tool if the threat of investigation is credible and if criminals are unable to displace their activity to avoid controls. We study an Italian policy designed to tackle mafia misappropriation of public funds by screening companies applying for subsidies over 150,000 Euros. Using all subsidies to firms co-financed by the European Union from 2008 to 2015, we find that a group of firms starts self-selecting below the threshold immediately after its introduction. Those firms are concentrated in mafia-affected cities, are lower performing, operate in typical mafia sectors, and have balance sheet indicators of money laundering. While avoiding violence, non-repressive strategies might have different unintended consequences: criminal organizations react with an immediate strategic displacement which reduces states’ capacity to detect them, highlighting the importance of designing policies that anticipate the sophistication of criminal organizations. (JEL H00, D72).

Neutralizing the Tentacles of Organized Crime. Assessment of an Anti-Crime Measure in Fighting Mafia Violence

“…Our results thus complement and extend other recent work that documents the e↵ectiveness of city council dissolution in favoring better long-run local economic performance (Fenizia and Saggio, 2022), fostering women's political empowerment (Baraldi and Ronza, 2022), enhancing the quality of elected politicians (Daniele and Geys, 2015), and improving tax collection and the allocation of public funds (Di Cataldo and Mastrorocco, 2021). Moreover, since some studies have shown that repressive policies bring about a violent reprisal from criminal organizations (e.g., Calderón et al, 2015;Castillo and Kronick, 2020), our analysis contributes to the literature studying the e↵ectiveness of non-repressive government measures in fighting organized crime activities (Daniele and Dipoppa, 2022).…”

Neutralizing the Tentacles of Organized Crime. Assessment of the Impact of an Anti-Crime Measure on Mafia Violence in Italy

“…Our results thus complement and extend other recent work that documents the e↵ectiveness of city council dissolution in favoring better local economic performance (Fenizia and Saggio, 2022), fostering women's political empowerment (Baraldi and Ronza, 2022), enhancing the quality of elected politicians (Daniele and Geys, 2015), and improving tax collection and the allocation of public funds (Di Cataldo and Mastrorocco, 2022). Moreover, since some studies have shown that repressive policies trigger violent reprisals from criminal organizations (e.g., Calderón et al, 2015;Castillo and Kronick, 2020), our analysis contributes to the literature studying the e↵ectiveness of non-repressive government measures in fighting organised crime activities (Daniele and Dipoppa, 2022).…”

“…Recent Italian measures against mafia infiltration on politics have aimed at combating bribery. These measures can be defined as non-repressive in that they are directed to cutting o↵ the economic resources of organised crime, not engaging in an explicit battle against local clans through stepped-up deployment of law enforcement bodies (Daniele and Dipoppa, 2022). Nonetheless, non-repressive measures can reduce the expected overall payo↵ to organised crime from influencing political decisions.…”

“…Finally, given that various studies have shown that repressive measures tend to provoke violent reprisals by criminal organizations (e.g Calderón et al, 2015;Castillo and Kronick, 2020),. our analysis contributes to the empirical analysis of the e cacy of non-repressive government measures in fighting organised criminal violence(Daniele and Dipoppa, 2022).…”

Mafias and Firms

“…On the empirical front, Le Moglie and Sorrenti (2022) compare provinces with high versus low presence of OCGs before and after the 2008 financial cri-sis and find that provinces with less presence of OCGs have been subject to a lower drop in the number of new firms, suggesting that OCGs helped firms overcome the reduction in the availability of credit. Daniele and Dipoppa (2022) documents the strategic behavior of firms participating in public procurement projects to elude screenings to detect mafia-connected firms. Calamunci and Drago (2020) find that the assignment of infiltrated firms to judicial investigations has a positive spillover on competing firms suggesting a large burden imposed by infiltrated firms on other firms.…”