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Private states and the enforcement of property rights - theory and evidence on the origins of the Sicilian mafia

Bandiera, Oriana (2002) Private states and the enforcement of property rights - theory and evidence on the origins of the Sicilian mafia. 3123. Centre for Economic Policy Research, London, UK.

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Abstract

Historical records show that the Sicilian mafia initially developed to protect land from predatory attacks, at a time when publicly provided security was scarce and banditry widespread. Using a common-agency model, the Paper shows that: (i) it is optimal for each landowner to voluntarily buy protection even if this results in a worse equilibrium for the landowning class as a whole and (ii) other things equal, mafia profits are higher where land is more fragmented. The argument is based on the fact that protection involves an externality because by buying protection each landowner deflects thieves on others’ properties. Because of the externality, for each landlord protection is more valuable if they are one of the few to receive it, thus each landlord will be willing to pay more if some landlords are left out. Land fragmentation increases the number of landlords who would pay to keep some out, which in turn increases mafia’s profits. Using qualitative data from a parliamentary survey (1881), the Paper also shows that in 19th century rural Sicily mafia was in fact more likely to be active in towns were land was more divided.

Item Type: Monograph (Discussion Paper)
Official URL: http://www.cepr.org
Additional Information: © 2002 Oriana Bandiera
Library of Congress subject classification: H Social Sciences > HC Economic History and Conditions
H Social Sciences > HD Industries. Land use. Labor
Journal of Economic Literature Classification System: O - Economic Development, Technological Change, and Growth > O1 - Economic Development > O17 - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements: Legal, Social, Economic, and Political
C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C70 - General
D - Microeconomics > D2 - Production and Organizations > D23 - Organizational Behavior; Transaction Costs; Property Rights
Sets: Collections > Economists Online
Departments > Economics
Research centres and groups > Suntory and Toyota International Centres for Economics and Related Disciplines (STICERD)
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Identification Number: 3123
Date Deposited: 05 Jun 2008 09:42
URL: http://eprints.lse.ac.uk/5385/

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