Closed for mafia: Evidence from the removal of mafia firms on commercial property values

Abstract

Using a sample of almost 7000 Italian municipalities from 2002 to 2019, we investigate how the removal of mafiainfiltrated firms affects commercial sale and rental prices.We conjecture that targeting mafia businesses leads to a reduction in local disamenities and an increase in the demand for commercial properties. Applying the latest methodologies based on difference-in-differences approaches, we show that antimafia policies aimed at confiscating and reassigning mafia firms have positive spillover effects on commercial real estate prices, driving values upward by about 4%. This is especially true for small-medium municipalities in mafia-ridden provinces.

Mafia doesn't live here anymore: Antimafia policies and housing prices

“…First, we hypothesize that seizing the mafia's assets is a more effective way to reduce the economic mafia power compared with the alternative DC policy because once the mafia's pressure on territories is (at least partially) released, then the change in the economic environment fosters economic development (Calamunci & Drago, 2020; Calamunci et al, 2022). This, in turn, increases housing pressure (Beer et al, 2007) in territories formerly affected by the mafia presence; hence, the registered positive effect of SR policy on the growth rate of home prices.…”

“…In this perspective, it is not unlikely for the pervasive presence of organized crime groups to affect real estate values. Following the reasoning of Calamunci et al (2022), we hypothesize that the infiltration of the mafia in the real estate sector acts as a latent disamenity which curbs property prices. Thus, provided they turn out to be effective, public policies aimed at hitting organized crime and at weakening their influence and power over the local economy and politics may be expected to increase residential property values.…”

“…Di Cataldo and Mastrorocco (2022) provide evidence of a distortion in the allocation of public funds to the advantage of mafia's entrepreneurial interest in municipalities where DC policies are later enacted. Calamunci et al (2022) find that in mafia‐infested municipalities, SR policies targeting firms have a positive spillover effect on the commercial property market. Fenizia and Saggio (2022) analyze the long‐term impact of the DC policy, and show that municipalities whose city council has been dissolved for mafia infiltration experience a decrease in unemployment, as well as an improvement in the management of public funds and tax compliance.…”

“…Second, we contribute to the urban literature by linking house prices with a new context, such as organized crime and assets reallocation. With the exception of the abovementioned contribution of Calamunci et al (2022), as well as that of Battisti et al (2022), who investigate the impact of mafia‐type organized crime on residential property values in the city of Naples and find that Camorra murders involving innocent people drive housing prices down by 2.5%–3.8%, the existing empirical literature has overlooked the nexus between organized crime and property prices in Italy. In this perspective, we focus on the effects of the SR and DC policies on the economic sphere and at a local level and expand the scope of our analysis to the entire Italian territory.…”