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A Theory of Organized Crime, Corruption and Economic Growth

Author: Keith Blackburn; Kyriakos C. Neanidis; Maria Paola Rana
Publication Date: October 2017

Summary: A framework for studying the interactions between organized crime and corruption, together with the individual and combined effects of these phenomena on economic growth is developed in this article. Criminal organizations co-exist with law-abiding productive agents and potentially corrupt law enforcers. The crime syndicate obstructs the economic activities of agents through extortion, and may pay bribes to law enforcers in return for their compliance in this. This article shows how organized crime has a negative effect on growth, and how this effect may be either enhanced or mitigated in the presence of corruption. The outcome depends critically on a trade-off generated when corruption exists, that between a lower supply of crimes and the probability these crimes are more likely to be successful.

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