Corruption and Organized Crime: Growth Implications for Italy

This paper examines the impact of corruption on economic growth in the presence of organized criminal activities. Using a panel of 19 Italian regions for the period 19832009, the analysis reveals (i) a growth-inhibiting effect of both corruption and organized crime, and (ii) that in the presence of organized crime the growth-distorting effect of corruption is less severe. This finding offers support to the argument that with organized corruption arrangements and better coordination in the bureaucrat’s rent-seeking behavior, corruption is less distorting for economic growth. The results are robust to different specifications, measures of organized crime, and estimation methods.