6533b7dafe1ef96bd126e6fd
RESEARCH PRODUCT
Extortion, firm's size and the sectoral allocation of capital
Luigi BallettaAndrea Mario Lavezzisubject
Organized Crime Economic Structure Sicilian Mafia Asymmetric Information Principal-Agent Theory.Settore SECS-P/01 - Economia Politicadescription
Extortion of firms is a typical activity of organized crime such as Mafia. We develop a simple principal-agent model to find the Mafia-optimal extortion as a function of firm’s observable characteristics, specifically firm’s size. We test the predictions of the model on a unique dataset on extortion in Sicily, the Italian region where Mafia is most active. Our empirical findings show that i) extortion moderately increases with firm’s size ii) extortion is regressive, the average extortion rate ranging from approximately 40% of operating profits for small firms to 2% for large firms iii) extortion turns average cost function decreasing, therefore influencing market competition
| year | journal | country | edition | language |
|---|---|---|---|---|
| 2014-01-01 |