Abstract
Organized crime and the state have coexisted for almost two centuries: sometimes they “peacefully” collude, other times they fight. By a game-theoretic framework, I show that criminal organizations attack only if the state undertakes a successful economic contrast to reduce criminal profitability (e.g., asset confiscation), whereas they cease hostilities in presence of harsh military repression (i.e., conviction of mobsters or military intervention). Furthermore, I show that illegal market booms increase the harshness of state repression.
These results are strongly at odds with the existing literature, claiming that military repression is likely to yield escalation (unless the policy is carefully designed), whereas targeting criminal revenues should deter conflicts without provoking such a drawback.
In particular, by distinguishing the two main types of organized crime violence, namely internal violence (“mafia wars”) and external violence (war against the state), I show that economic contrast reduces conflicts inside the organization but increases retaliation against the state, whereas military repression leads to a decrease in both internal and external violence.
Moreover, I also find that the population propensity to rebel to organized crime - which is of paramount importance for an effective state repression - seems to naturally stem from a “coordination game” between local inhabitants.
Finally, I show that high values of corruption and violence can coexist in presence of economic repression only, but corruption usually crowds violence out in presence of a strong military repression.
I test these predictions using data on organized crime related murders in Italy. Whereas I find no (if not negative) effect of confiscation on internal violence, by combining access to ports and an exogenous variation in US drug demand, I find a positive impact of confiscation on external violence, namely murders of public officers.