In this dissertation, I analyse the economic consequences of two categories of violence: organised crime and internal conflicts. It is well-established in the economic literature that both organised crime and civil wars imply significant economic losses. For example, Abadie and Gardeazabal (2003) investigate the economic effect of the Basque terror campaign and estimate a reduction of the GDP per capita of approximately 10 percent. Similarly, Pinotti (2015) studies the economic effect of the Italian mafia expansion into two regions not historically affected by this phenomenon, and measures a reduction of the GDP per capita of approximately 16 percent. Here, I estimate the cost of organised crime by looking at the economic consequences of resource misallocation linked to the Italian mafia presence. I study the cost of internal conflicts by taking a close look at the contemporaneous effects of civil wars and at the humanitarian crisis triggered by these violent events. In Chapter 1, I study how the response of firms to mafia infiltrations can generate economic costs. I explain theoretically that extortion racketing imposed on firms located in Northern Italy is linked to resource misallocation, which is measured using the within-industry covariance between size and productivity. Using a model of monopolistic competition, I prove that extortion racketing generates misallocation, because it introduces distortions in the alignment of the rankings of firms' productivity and size. I then test this hypothesis using a panel dataset that provides information on the economic performance of 12 sectors, located in the 46 Italian provinces, between years 1998 and 2012. Through a triple-Difference-in-Differences strategy I provide evidence that the industries that are appealing for mafia groups, located in territories that experience mafia presence, suffer resource misallocation after mafia arrival. In Chapter 2, I take the findings in the previous chapter to develop a method to estimate the economic cost of mafia infiltrations in the northern Italian economy. Specifically, I quantify the share of output that mafia groups extort from firms and the output loss that these transfers imply. The novelty of this methodology relies on the use of both panel data analysis and structural econometrics. The results of this analysis suggest that the transfer ranges between 1 and 8 percent of firm-level output for the taxed firms. I simulate the counterfactual northern Italian economy without infiltrations and estimate the cost due to mafia expansion. The results suggest that the northern Italian economy, between 2000 and 2012, suffered an aggregate loss of approximately 2. 5 billion Euros. Only one fourth of this cost is the aggregate transfer to mafia groups. The remaining three fourths correspond to the contraction of production that impacted firms suffer because of resource misallocation. In Chapter 3, I study the economic impact of internal conflicts. This chapter is extracted by the World Bank Policy Report Recovery from conflict: lessons of success (2017), joint work with Hannes Mueller and Augustin Tapsoba. In this report we study long-term impacts of violent conflict, to provide insights into the costs of conflict and policies to prevent conflict relapse. In this chapter I present two sections of the original report. In the first one, we analyse the contemporaneous effect of civil wars by looking at the economic growth of country or region that experiences violence. Using panel data regressions we show that the economic growth of the impacted territories experiences dramatic decreases. In the second section, we analyse the humanitarian crisis triggered by civil war. We look at the close relationship between violence and refugees. We show that in the average civil war year around 500,000 persons leave their country. Abadie, Alberto, and Javier Gardeazabal. 2003. "The Economic Costs of Conflict: A Case Study of the Basque Country . " American Economic Review, 93 (1): 113-132. Pinotti, Paolo. (2015), The Economic Costs of Organised Crime: Evidence from Southern Italy. Econ J, 125: F203-F232. doi:10. 1111/ecoj. 12235.
|Date of Award||19 Jun 2019|
|Supervisor||Jorge Brandts Bernad (Tutor) & Hannes Felix Muller . (Director)|
- Crim organitzat; Crimen organizado; Organised crime; Conflictes interns; Conflictos internos; Internal conflicts; Cost economic; Costo económico; Economic cost