Political Violence Workshop

Date: 

Tuesday, April 30, 2019, 12:00pm to 2:00pm

Location: 

CGIS South Building, 1730 Cambridge Street, Room S050

"Doing Business Below the Line: Screening, Mafias and Public Funds"

(co-authored with Gianmarco Daniele, Bocconi University)

Speaker:

Gemma Dipoppa, PhD Candidate, Political Science Department, University of Pennsylvania.

Contact:

Kaitlyn Chriswell
chriswell@g.harvard.edu

Chair:

Joshua Kertzer, Faculty Associate; Chair, Weatherhead Research Cluster on International Security. Paul Sack Associate Professor of Political Economy, Department of Government, Harvard University.

 

Abstract:

Criminal organizations make large profits misappropriating public funds, causing an economic loss for the state and the strengthening of criminal groups. This paper evaluates a policy aimed at fighting this phenomenon and the displacement effects the policy caused. In 2013, the Italian government enforced a law screening mafia-related firms out of the application for European subsidies when applying for more than 150,000 Euros. We exploit this time-varying discontinuity to identify firms self-selecting below the threshold after the law was approved. We observe a large jump in firms applying for just below 150,000 Euros after 2013. Firms sorting are more likely to come from mafia-affected cities, display worse performances, operate in typical mafia-affected sectors and have balance sheet indicators suggesting potential for money laundering. The jump we identify corresponds to 3.8\% of all subsidies assigned in our sample. Our findings shed light on the extent to which mafia-connected firms misappropriate public funds and on the effectiveness of screening policies applied discontinuously when mafias behave strategically.