Template-type: ReDIF-Paper 1.0
Author-Name: Gianmarco Daniele
Author-Name: Gemma Dipoppa
Title:Doing Business Below the Line: Screening, Mafias and Public Funds
Abstract:In 2013, the Italian government reinforced a screening mechanism to detect mafia-connected firms and ensure that their applications for subsidies over 150,000 euros are unsuccessful. We exploit this discontinuity to test whether (and how many) firms self-select below the threshold to avoid the screening after the law was strengthened. We find a large increase in subsidies just below the threshold and after the approval of the law, suggesting that about 3.8% of firms applying for subsidies reduced rent seeking to avoid police screening. In line with this interpretation, sorting is larger in mafia-affected cities and firms sorting at the 150,000 euros threshold display typical features of criminal firms. These findings shed light on (i) the extent to which mafia-connected firms misappropriate public funds; (ii) their strategic behavior in avoiding anti-corruption policies; (iii) the effectiveness of the new law at screening mafia-related firms out of the application process; (iv) the leverages policymakers can use to identify crime displacement.
Classification-JEL:
Keywords:
Length: 80 pages
Number: 1898 
Creation-Date: 2018
File-URL: https://repec.unibocconi.it/baffic/baf/papers/cbafwp1898.pdf
File-Format: application/pdf
File-Size: 7322
Handle: RePEc:baf:cbafwp:cbafwp1898