Organized Crime and Firms: Evidence from Antimafia Enforcement Actions

Abstract

We exploit staggered municipality-level antimafia enforcement actions in Italy over the 1995–2015 period to study how the presence of organized crime affects firms. Following enforcement actions, we find increases in competition (i) among firms and (ii) for public procurement contracts. Firms that do not exit after a weakening of organized crime shrink in size, more so when operating in the nontradable sector. Our findings are consistent with organized crime acting as a barrier to entry and affecting local economic activity. This paper was accepted by David Sraer, finance. Supplemental Material: Data and the online appendix are available at https://doi.org/10.1287/mnsc.2021.00859 .