Public Spending and Organized Crime: The Case of 1997 Marche and Umbria Earthquake
12:00 - 13:00
Public transfers from central governments are widely used policy tools aimed at promoting economic development. We argue that large amounts of public transfers can have the opposite effect to the one desired. By providing politicians and entrepreneurs with higher incentives to engage in rent seeking practices, they can lead to an increase in illegal activities. Preliminary results we obtain from a panel dataset of the provinces of central Italy for the period 1993 – 2003 show a positive association between the increase in public spending and the spread of organized crime. We find no evidence of a similar relationship between public spending and other kinds of violent crimes. These results suggest that Mafia activity takes place wherever economic opportunities arise.