Description:

Elena Stella: Organized Crime and Firms

Abstract: This paper examines the impact of organized crime's ability to infiltrate firms on local  economic activity. Focusing on Italy, I develop a novel index to measure the presence of infiltrated firms in the public procurement market. I then investigate the effects of the 2013 Antimafia Certification Law, a nationwide policy that creates a negative incentive for infiltrated firms to participate in public tenders. By leveraging the pre-policy level of local market infiltration and exploiting this policy shock, I analyse firm dynamics and the provision of public goods at the local level. Preliminary results suggest that the policy was successful in shifting infiltrated firms incentives, as the probability of these firms winning procurement contracts drops dramatically after 2013. Moderately infiltrated municipalities experience larger entry, higher winning discounts on procurement contracts and firm dynamism after the shock. These effects are attenuated or even reversed in their sign for municipalities with extremely high rate of infiltration.