Tough on criminal wealth? Exploring the link between organized crime’s asset confiscation and regional entrepreneurship

Abstract

This paper addresses the question BHow does the fight against organized crime affect regional entrepreneurship?^We focus on asset confiscation in relation to alleged connections of their owners with organized crime, a highly debated policy measure against organized crime. Extending work on institutions and regional entrepreneurship, we propose that confiscation has contrasting effects on regional entries. On the one hand, confiscation of economic assets associated with criminal organizations' legitimate activities in a region reduces competition and triggers renewal, fostering new entries. On the other hand, seizure of criminal organizations' operational assets weakens their ability to exercise sovereignty, creating an institutional vacuum that lowers founding rates. Our results, based on a longitudinal study of Italian provinces between 2009 and 2013, provide support for both hypotheses. We also find that the negative effect associated with the confiscation of operational assets is mitigated when local governments have policies facilitating asset redeployment.

Closed for mafia: Evidence from the removal of mafia firms on commercial property values

“…However, since criminal organizations act illegally and tend to hide their operations, we use an indirect measurement of mafia infiltration proxying its empirical manifestation by removing mafia firms from the market. Our research also adds to the recent literature on the impact of economic‐oriented antimafia policies (F. Calamunci & Drago, 2020; F. Calamunci et al, 2021; Ferrante, Fontana, et al, 2021; Ferrante, Reito, et al 2021; Operti, 2018). Although it is widely recognized that asset reallocation may be beneficial from a socioeconomic perspective (Esposito & Ricci, 2015), the economic literature has focused primarily on the assessment of antimafia measures with political or punitive content.…”

Financial and Institutional Reforms for an Entrepreneurial Society

“…However, any remedial suggestions must take current conditions into account. This is illustrated by Operti (2018) in her study of organized crime in Italy. She shows that the fight against organized crime, and more specifically the aggressive confiscation of criminal wealth, may have unintended consequences for entrepreneurship.…”

“…The ultimate causes reside in the complex institutional body that brings forth the entrepreneurial activity we observe. Keeping this in mind, we conclude that any policy intervention must be carefully tailored to the existing institutional framework , and changing the institutional setting may have unintended consequences even on the type of entrepreneurship that a specific reform was intended to foster (Operti 2018). However, this does not mean we should let history run its course and hope luck will be on our side (Fritsch and Wyrwich 2018).…”

What happens in criminal firms after godfather management removal? Judicial administration and firms’ performance

“…First, it is one of only a handful of studies providing causal evidence about the direct effect of confiscation, which has received little attention so far. This evidence rests on unique firm-level data and contrasts with the approach in Ferrante et al (2019) and Operti (2018), which uses aggregate-level data (provincial and municipal units) . Indeed, to the best of my knowledge, the current analysis is the first attempt to evaluate, through an econometric approach, what happens to businesses when JA is implemented.…”

“…While previous studies focus on the relationship between regional entrepreneurship (Operti, 2018) and the degree of competition in local entrepreneurship (Ferrante et al, 2019), little is known about the direct effects on the firms targeted by the interventions, despite their widespread implementation and powerful socioeconomic effects. For example, in a recent contribution, Calamunci and Drago (2020) estimate the spillover effects of the judicial administration of OC firms on legal firms, i.e., those firms that were neither infiltrated by nor colluded with criminal organisations operating in the same market.…”