DP16732 Does Organized Crime Attract EU Funding? Evidence from the Sicilian Mafia

Author(s): João Pereira dos Santos, José Tavares, Marlene Thomas
Publication Date: November 2021
Keyword(s): EU Funds, organized crime, Public Funds Misappropriation, Sicily
JEL(s): K4, O17, R12
Programme Areas: Public Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=16732

This study examines the impact of the Sicilian Mafia on the allocation of European Union (EU) funding. Our focus is on the number of EU projects and the amount of EU funds awarded to Sicilian municipalities between 2007 and 2019. Mafia activity is proxied by real estate assets seized from organized crime, and instrumented by either geographical shifters of land value, or geographical pointers of Mafia´s historical roots as of the end of the 19th century. We find that Mafia presence increases the amount of EU funds and the number of EU projects assigned to municipalities. Our results are consistent across instrumental variables used, as well as type of EU projects - namely infrastructure, goods and services, grants to individuals, and incentives to firms, and robust to different tests. Our findings suggest that local institutions â?? including the prevalence of organized crime, affect how place-based policies â?? even those originating in international institutions such as the EU, are allocated.