Fenizia, Alessandra and Saggio, Raffaele creator text The American Economic Review monographic eng

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114(7), Jul, 2024: p.2171-2200 This paper studies the long-run economic impact of dismissing city councils infiltrated by organized crime in Italy. Using a matched difference-in-differences design applied to the universe of Italian social security records, the analysis finds that city council dismissals (CCDs) increase employment, firm creation, and industrial real estate prices. The effects are concentrated in Mafia-dominated sectors and in municipalities where fewer incumbents are reelected. By weakening the Mafia and fostering trust in local institutions, CCDs generate substantial economic returns. The findings suggest that dismissals represent an effective intervention for establishing legitimacy and spurring economic activity in areas dominated by organized crime, with broader implications for governance and development policy. This paper studies the long-run economic impact of dismissing city councils infiltrated by organized crime. Applying a matched difference-in-differences design to the universe of Italian social security records, we find that city council dismissals (CCDs) increase employment, the number of firms, and industrial real estate prices. The effects are concentrated in Mafia-dominated sectors and in municipalities where fewer incumbents are reelected. The dismissals generate large economic returns by weakening the Mafia and fostering trust in local institutions. The analysis suggests that CCDs represent an effective intervention for establishing legitimacy and spurring economic activity in areas dominated by organized crime.- Reproduced https://www.aeaweb.org/articles?id=10.1257/aer.20221687 Political Economy, Organized Crime, Mafia, City Council Dismissals, Economic Growth, Employment, Firm Formation, Industrial Real Estate, Trust in Institutions, Criminology, Development Economics, Italy, Governance, Legitimacy The American Economic Review 240927