Organised Crime

Organised crime exerts major effects on economic development, social outcomes, and community well-being. In this section, we discuss the impacts on growth, employment, firm dynamics, investment, violence, human capital, and public health. A consistent finding across many studies is that criminal networks impose large social and economic costs, although the mechanisms differ across contexts.

Economic Outcomes

Economic Activity

A strand of work in development economics asks how criminal organisations affect long-run development. Pinotti (2015) studies the Italian mafia and finds that areas with higher mafia presence exhibit systematically lower growth rates in formal economic activity. The mafia’s reliance on extortion, intimidation, and infiltration of local businesses can distort resource allocation and deter entrepreneurship. Melnikov et al. (forthcoming) analyse how gang presence influences labour mobility and development outcomes. They show that gang territorial control can disrupt labour flows and affect the spatial allocation of productive firms in the country. Specifically, gangs impose mobility restrictions to prevent informants from the police or rival gangs from entering into their territory. As a consequence of these restrictions, residents are not able to commute to areas with better job opportunities, thereby limiting access to broader labour markets. The authors find that these constraints have long-term consequences for earnings and human capital accumulation. The authors emphasise that the economic costs of these mobility barriers accumulate over time, especially as non-gang areas experience higher employment growth – making access to those opportunities increasingly critical.

Fenizia and Saggio (2024) also find evidence on the negative effects of the mafia. Analysing Italian municipalities, they show that removing mafia influence via city council dismissals leads to significant increases in employment, firm creation, and property prices, particularly in sectors previously dominated by the mafia. Their results suggest that city council dismissals weaken the Mafia’s ability to enforce monopolies. Slutzky and Zeume (2018) find similar evidence that anti-mafia enforcement efforts increase competition and innovation in affected municipalities in Italy. In the same way, Ganau and Rodríguez-Pose (2018) show that organised crime is negatively associated with firm productivity growth in Italy. Lastly, Daniele and Marani (2011) find that mafia-related crime is negatively correlated with foreign direct investment (FDI) across Italian provinces. Even after accounting for financial incentives, higher levels of organised crime appear to deter foreign investors, likely by signalling a weak or unfavourable socio-institutional environment.

Furthermore, while organised crime typically undermines economic activity, some evidence suggests it can also play a more complex role. In Mexico, Murphy and Rossi (2020) find that areas with a history of illicit agriculture – shaping contemporary cartel presence – exhibit higher community-level socioeconomic outcomes, indicating that cartels may sometimes act as alternative governance providers. Similarly, Le Moglie and Sorrenti (2022) show that during the 2008 financial crisis, Italian provinces with stronger mafia presence experienced smaller drops in new business formation, suggesting that organised crime may have injected illicit capital into the formal economy when conventional credit sources contracted.

Labour Market Effects

Violence and extortion by organised crime can disrupt labour markets. Firms may reduce hiring, relocate, or shut down. Workers may migrate to safer locations or remain unemployed if they perceive high risks during commutes or in the workplace (e.g. Aldeco et al. 2024, Melnikov et al. forthcoming). Velásquez (2020) shows that increases in local homicide rates significantly reduce self-employment among women and lower earnings for self-employed men. The results suggest that fear of crime alters occupational choices and suppresses income, especially among informal workers, highlighting the broader economic costs of violence by drug cartels. Relatedly, Brown et al. (2019) investigate how exposure to violent crime during Mexico’s drug war influenced individuals’ risk preferences. They find that as local-area violent crime increased, individuals’ risk aversion also rose significantly, which could potentially depress entrepreneurial activity.

Criminal organisations can also impose a parallel form of ‘taxation’ on labour-intensive sectors such as distribution firms and public transport (Konrad and Skaperdas 1998, Martínez et al. 2016, Ponce et al. 2016, Magaloni et al. 2020, Brown et al. 2025, Estefan and Ordonez 2024). Brown et al. (2025) study how gang competition shapes extortion using a novel dataset from a large wholesale distributor in El Salvador, linking approximately 50,000 extortion payments to firm-level sales. They show that while reduced gang competition lowers homicide rates, it simultaneously increases extortion, leading to higher consumer prices and adverse health outcomes. These findings underscore a trade-off between lower violence and higher criminal rents, with significant downstream effects on welfare. Similarly, Estefan and Ordonez (2024) document that in Guatemala, extortion distorts markets by limiting competition and boosting rents for incumbent firms. Balletta et al. (2019) further demonstrate that smaller firms in Italy pay a higher proportion of their profits as extortion fees compared to larger firms. This regressive taxation discourages market entry and fosters concentration, as smaller firms are often priced out by cumulative extortion costs. Complementing this, Piemontese (2023) uses a structural estimation model to quantify the economic cost of mafia extortion in Northern Italy, finding that extortion reduces firm-level output by 0.5% to 5%, causing resource misallocation and welfare losses. The impact intensifies with multiple extortion demands from different criminal groups, further deterring investment and business expansion.

In addition to suppressing employment and income, organised crime can also shape wage inequality by affecting labour supply and capital allocation. Using a general equilibrium model, Pi and Zhang (2020) show that when unskilled or both skilled and unskilled workers participate in crime, wage inequality increases if the skilled sector is more capital intensive and demand for skilled labour is highly elastic. If only skilled workers are involved, inequality rises regardless of demand conditions.

Criminal organisations can also influence firm dynamics through other multiple and complex channels beyond extortion. Arellano-Bover et al. (2024) examine the infiltration of Italy’s legal economy by organised crime, identifying three distinct motives: a functional motive, where firms are used to carry out criminal operations; a competitive motive, where existing firms are co-opted to enhance market power through illicit means; and a pure or relational motive, wherein large, reputable firms are infiltrated to gain access to influential political or economic networks. The latter represents a novel contribution, emphasising how criminal groups can strategically exploit legitimate firms without directly engaging them in criminal activities. Complementing this evidence, Fenizia and Saggio (2024) show that mafia infiltration at the municipal level in Italy leads to lower rates of firm entry, reduced investment in capital-intensive industries, and greater reliance on informal arrangements. Mirenda et al. (2022) also show that mafia infiltration in legal sectors can reduce competition, hamper formal entrepreneurship, and reinforce local monopolies.

Barone and Narciso (2015) further document that business subsidies in mafia-affected regions are partly diverted to criminal networks, weakening public policy efforts to stimulate local development. Beyond infiltration, organised crime can actively shape local market structures. In Brazil, drug gangs are found to regulate entry and exit in retail markets, using violence and intimidation to maintain monopolistic control and suppress outside competition (Cavgias et al. 2023). A similar pattern occurs in Medellín, Colombia, where criminal organisations monopolise legal goods markets such as dairy products, eggs, or gas canisters (Blattman et al. 2025). Such interventions distort market dynamics and hinder local economic growth.

Finally, criminal organisations can also influence firm dynamics through the use of violence. Violent competition among criminal groups generates heightened uncertainty, disrupts supply chains, and suppresses productive economic activity. Rozo (2018) finds that in Colombia, surges in violence linked to organised crime compel firms to reduce output or exit the market altogether, resulting in lower real wages for workers in affected areas.

Social Outcomes

Violence and Social (Di)stability

Violence is perhaps the most visible manifestation of organised crime’s presence. Patterns of rising violence are frequently linked to state enforcement approaches and the political alliances that underpin them. For instance, Dell (2015) demonstrates that political victories by Mexico’s PAN party diverted trafficking routes, escalating violence along alternative corridors as rival groups fought to gain control. Castillo and Kronick (2020) reinforce these findings, arguing that poorly targeted crackdowns increase criminal profits and make kingpins more short-sighted, fuelling further violence. Only by targeting the most violent actors can the state reduce violence without exacerbating supply or conflict.

State interventions can also unintentionally destabilise criminal equilibrium. Calderón et al. (2015) show that Mexico’s strategy of targeting cartel leadership, especially kingpins, disrupted existing balances of power, sparking both intra- and inter-cartel wars. These leadership removals had immediate effects on drug-related violence and spillovers to civilian homicides, particularly in municipalities within the trafficking network. Complementing this view, Phillips (2015) finds that while decapitation strategies may yield short-term reductions in violence when mid-level leaders are arrested, they often lead to long-term increases as fragmented groups compete to regain market control. Notably, violence rises more when leaders are killed than when they are arrested.

Additional evidence shows that state enforcement often generates unintended spillover effects that intensify violence. Castillo et al. (2020) document how seizures of cocaine shipments from Colombia to Mexico lead to increased violence in Mexican municipalities where cocaine becomes scarce. Osorio (2015) finds that crackdowns in areas with dense criminal presence exacerbate inter-organisational conflicts and lead to the spatial diffusion of violence. Rios (2013) further describes this pattern as a “self-reinforcing violent equilibrium”, where repression and cartel rivalries mutually escalate, fuelling rising homicide rates. Moreover, Atuesta and Ponce (2017) highlight how enforcement efforts – particularly those targeting criminal leadership – provoke organisational fragmentation, spawning smaller, more volatile groups that violently compete for control. Although the pace of violence may eventually slow as fragmentation deepens, the immediate effects are destabilising and prolong cycles of conflict.

Beyond state-led interventions, internal criminal dynamics also contribute to violence. Bruhn et al. (2021) show that gang violence is shaped by internal cohesion and market competition: more fragmented or competitive environments tend to produce more violence, pointing to the role of behavioural and social dynamics in shaping outcomes beyond simple market models.

Another important driver of violence is the increasing value of certain commodities and the territories that produce them. Sobrino (2019) finds that rising US heroin demand prompted cartels to expand into municipalities with favourable conditions for cultivation and transport, triggering local surges in violence. Similarly, Mejia and Restrepo (2013) and Millán-Quijano (2020) show that higher cocaine prices are associated with more conflict in Colombia. InAfghanistan, Gehring et al. (2023) uses heroin price data to link drug market fluctuations to armed conflict. Theoretical models also support these observations: as the value of a territory rises, so do the incentives for turf wars between competing criminal actors (Bueno de Mesquita 2020, Castillo and Kronick 2020).

However, commodity booms do not always lead to greater violence. Sánchez de la Sierra (2020) shows that in eastern Congo, rising coltan and gold prices led to the emergence of criminal actors who, rather than engage in open conflict, established monopolies of violence and forms of governance around mining sites and nearby villages. These groups implemented taxation, regulated labour, and provided protection – state-like functions that stabilised order. This case highlights that resource booms may drive violence or governance, depending on whether a monopoly or competition for control emerges.

Finally, despite their violent capacities, criminal organisations can also foster social stability under specific conditions. In Brazil, Biderman et al. (2019) finds that monopoly control by a single gang significantly reduces violence. A similar dynamic unfolded in Medellín, Colombia, where a 2013 non-aggression pact, El Pacto del Fusil, between two non-state armed confederations (La Oficina and the Clan del Golfo) lowered homicide rates to roughly 12 per 100,000 by 2024. This informal arrangement, driven by mutual business interests rather than state action, coordinated hundreds of local street gangs that regulated drug sales, collect extortion payments, and mediate disputes. Yet such peace is often fragile. In El Salvador, a 2016 gang truce similarly reduced violence but raised extortion by 20%, inflating prices of essential goods like pharmaceuticals (Brown et al., 2025). These examples reveal that while criminal coordination can suppress violence, it often entrenches monopolistic rent extraction.

Human Capital

Organised crime can hinder human capital development through multiple interrelated pathways. Communities exposed to high levels of violence often experience substantial disruptions to schooling. Violence can undermine the provision of education and significantly influence the behaviours and decisions of students, parents, teachers, and school administrators. Monteiro and Rocha (2017), using data from Rio de Janeiro, show that children perform worse on standardised tests during periods of intense drug gang warfare. Specifically, the study identifies disruptions in the supply of education as a critical channel through which conflict affects student outcomes: exposure to armed violence is significantly correlated with elevated teacher absenteeism, increased principal turnover, and the temporary suspension of school operations. Similarly, Brown and Velásquez (2017) find that the expansion of drug cartel activity in Mexico is associated with lower educational attainment and higher employment among young adults. This shift in behaviour appears to be driven primarily by household financial hardship rather than individual preferences.

Beyond institutional disruptions and household economic responses, exposure to violence can also have profound effects on students’ psychological well-being and attitudes, which in turn influences learning outcomes. Chronic exposure to violent environments is linked to increased anxiety, stress, and trauma, all of which negatively affect cognitive development and academic performance (Michaelsen and Salardi 2020). Koppensteiner and Menezes (2021) show that exposure to local homicides in Brazil leads to declines in test scores, reduced school attendance, and increased dropout rates, effects that are particularly pronounced among boys from low-income families and largely driven by diminished educational aspirations and motivation.

The presence of criminal organisations can also distort local economic incentives, lower the perceived returns to education, and increase the recruitment of children into illicit activities. In such environments, children may come to view criminal work as more profitable or socially rewarding than low-wage legal employment. Evidence from El Salvador shows that children living in gang-controlled neighbourhoods are more likely to drop out of school and perform worse on standardised tests than those in nearby non-gang areas (Melnikov et al. forthcoming, Sviatschi 2022b). Similarly, in Peru, when the profitability of illegal activities rises – particularly in coca-growing regions – children are more likely to engage in this work, increasing their risk of becoming involved in drug trafficking (Sviatschi 2022a).

A third mechanism involves forced displacement: violent confrontations may push families to migrate, interrupting schooling (Aldeco et al. 2024). Over time, these factors reduce average levels of human capital, which in turn hinders economic development.

Public Health

Organised crime affects public health through both direct and indirect channels, as highlighted by a growing body of qualitative evidence. Directly, it generates fear, anxiety, and psychological distress, prompting behavioural changes within affected communities. These effects often extend beyond immediate victims, influencing broader patterns of mental well-being, physical activity, and consumption of goods and services (Lorenc et al. 2012, 2014). Indirectly, organised crime can weaken the institutional foundations necessary for effective public health policy by undermining law enforcement, regulatory frameworks, and tax collection – key components for financing and implementing health interventions (Reynolds and McKee 2010). While cross-national quantitative evidence remains limited, emerging research from Latin America and the Caribbean offers valuable insights into the public health consequences of organised crime. Country-level studies help illustrate how these mechanisms operate in practice, particularly in regions where organised criminal groups exert substantial territorial and institutional control.

In Mexico, where violence has escalated due to drug trafficking organisations, Villarreal and Yu (2017) document how surges in homicide rates heighten fear and psychological distress, even for those not directly exposed to violence. In Brazil, fear resulting from organised crime violence can also reduce the use and access to specific public services. Pecanha et al. (2024) show that urban violence can significantly disrupt the use of public health services. Using monthly clinic-level data from Rio de Janeiro, they find that each police-related shooting leads to a 12% drop in primary care procedures, particularly on the day of the event. These effects are more pronounced in low-income neighbourhoods, highlighting how exposure to violence not only limits access to essential services but also exacerbates existing inequalities.

Furthermore, reductions in violence do not necessarily eliminate the broader health impacts associated with organised crime. Criminal groups can influence health outcomes through alternative mechanisms – most notably through extortion. Brown et al. (2025) find that while a period of gang collusion in El Salvador led to a reduction in overt violence, it was accompanied by a significant rise in extortion. This increase in criminal taxation elevated the prices of pharmaceuticals, contributing to higher rates of hospital visits for chronic illnesses. In addition to extortion, organised crime can directly affect population health through drug trafficking. Pereira et al. (2025) show that surges in drug trafficking activity across municipalities in Brazil were associated with increased overdose-related mortality, indicating a rise in drug consumption among the local population.

Although this review does not cover all forms of politically or religiously motivated crimes, related evidence offers valuable insights. In Israel, Becker and Rubinstein (2011) show that suicide bombings by religious terrorist groups significantly reduce bus usage, especially among occasional riders and less-educated families. These groups face lower economic incentives to confront fear and are more influenced by media coverage. The study finds that the psychological impact is amplified when attacks are followed by regular news cycles, while attacks occurring before holidays – when media attention is limited – have little effect. These results highlight how fear, shaped by both violence and media exposure, can meaningfully alter everyday behaviour.

Finally, as we mentioned earlier, the rigorous causal evidence on the specific public health effects of organised crime remains limited. Most existing studies focus on general crime or violence, without distinguishing whether perpetrators are part of organised criminal networks. This is largely due to the difficulty of identifying which crimes are specifically attributable to organised criminal groups, rather than to common delinquency. Nonetheless, this broader literature consistently reveals negative impacts on both physical and mental health. For instance, Dustmann and Fasani (2016) find that exposure to local crime increases psychological distress in the United Kingdom, especially among women, while Cornaglia et al. (2014) report declines in mental well-being linked to violent crime in Australia. Similarly, Janke et al. (2016) show that violent crime reduces physical activity in England, and Hamermesh (1999) documents how crime alters work behaviour in the United States.

Housing and Distributional Effects

Criminal organisations can impose regressive economic costs on communities, disproportionately affecting low-income populations. Ajzenman et al. (2015) provide evidence from Mexico showing that drug-related violence significantly reduces housing values in poorer neighbourhoods, while property prices in wealthier areas remain largely unaffected. Their estimates suggest that increased homicide rates led to a cumulative loss of approximately USD 600 million in housing wealth, underscoring the unequal distribution of the economic burden associated with violence. Similarly, in El Salvador, gang presence has been shown to concentrate negative externalities – such as reduced economic activity and higher prices in subsistence goods – in marginalised urban areas, further entrenching spatial inequality (Melnikov et al. forthcoming, Brown et al. 2025, International Crisis Group 2017).

Governance, Corruption, and Public Trust

Organised crime engages with political systems in diverse and complex ways. Scholars have explored how state and non-state illegal armed groups influence elections, alter the trust and perception of formal institutions, or interact strategically with political actors (Berrebi and Klor 2008, Gallego 2018, Osorio et al. 2018, Alesina et al. 2019, Campedelli et al. 2023). We structure this section around three key areas: (1) criminal governance, (2) corruption, and (3) trust in formal institutions.

Criminal Governance

Criminal governance refers to the imposition of rules or behavioural restrictions by a criminal organisation over various actors, including its own members, other criminal actors, and non-criminal civilians (Lessing 2021). Rather than viewing organised crime as merely profit-oriented, this perspective emphasises the role of norms and institutional structures in shaping how criminal groups exert control. Criminal organisations do not merely operate in illicit markets – they often shape the lives, routines, and expectations of the populations they interact with by enforcing norms, adjudicating disputes, providing order, and sometimes delivering public goods. Yet not all forms of criminal activity constitute governance. A gang that extorts residents or occupies a street corner without regulating behaviour or providing services should not be understood as governing. As Lessing (2021) argues, using the term “governance” too broadly, such as for cases where criminal organisations only protect their own interests, weakens its meaning. What makes criminal governance analytically useful is that these groups go beyond managing their own members or businesses; they impose rules on outsiders, including civilians and other actors in their territory.

Criminal governance resembles, but also diverges fundamentally from, other forms of governance, including corporate governance, state-building, and rebel rule. Some of the most sophisticated criminal organisations exhibit corporate features – internal hierarchies, recruitment strategies, and complex management systems – but unlike licit firms, their authority often extends to entire communities or illicit markets (Lessing 2021). Still, this authority is not analogous to state-making. Though scholars have long used metaphors of state formation to understand organised crime (Blok 1974, Hobsbawm1969, Tilly 2017), these comparisons often obscure key distinctions. Criminal organisations rarely challenge state authority; instead, they govern in the intersections of state power (Yashar 2018), in spaces shaped by state repression, such as illicit markets or prisons.

Even rebel governance – perhaps the closest conceptual analogue – differs in its goal of competitive state-building (Kalyvas 2006, Kasfir 2015, Arjona 2016). Criminal groups, by contrast, govern without seeking sovereignty or formal state power. Their governance is partial, often overlapping with state functions, and may even coexist symbiotically with state institutions. As such, criminal governance cannot be understood apart from the state – it is simultaneously enabled by its absences and constrained by its presence (Koivu 2018, Gambetta 1996).

Empirical studies across different regions help clarify how this kind of criminal rule operates on the ground. When the state is weak, absent, or corrupt, criminal groups often step in to fill the gap. They enforce rules, resolve disputes, and provide basic order – functions that are usually expected from the state. In many neighbourhoods of Rio de Janeiro or Sao Paulo, for instance, militias or drug gangs hold de facto power over day-to-day life, shaping local norms and policing crime through informal justice systems (Magaloni et al. 2020; Lessing and Denyer Willis 2019). Complementing this, ethnographic research in Rio de Janeiro has shown how different types of criminal organisations contribute to distinct models of social control in the city’s favelas. Drawing on years of fieldwork and hundreds of interviews, scholars have documented how both drug gangs in the Zona Norte and militias in the Zona Oeste build varying relationships with residents – ranging from coercive to responsive forms of rule – that shape the daily social, economic, and political life of these communities (Arias 2006, Arias and Barnes 2017, Barnes 2025).

Scholars have also explored how local communities navigate and adapt to the presence of criminal governance. In Medellín, residents often view criminal groups as more reliable providers of security than the official police, who are frequently absent or abusive (Blattman et al. 2025). This perception is not only a reflection of loss in state trust but also illustrates how criminal governance adapts to local conditions. As Blattman et al. (2025) show, in neighbourhoods with high potential for drug rent, gangs responded to the presence of the state by expanding their provision of governance services, such as regulating violence, resolving disputes or offering protection. These patterns suggest that both repression and engagement by state actors can reshape the behaviour of criminal organisations. In doing so, the state may unintentionally reinforce or undermine localised forms of criminal rule, highlighting the dynamic interplay between state authority and criminal governance.

Beyond Latin America, scholars have also documented similar forms of criminal or armed governance in other regions. In eastern Congo, for example, Sánchez de la Sierra (2020) shows how roving warlords transformed into stationary bandits who provided security and justice when mineral rents were high and easily taxable. These armed actors, although capable of arbitrary violence, sometimes established localised monopolies of force, set up taxation systems, and administered justice – functions typically associated with states. When sustained expropriation was profitable, these groups even developed rudimentary fiscal administrations. In some contexts, such as parts of the DRC, the presence of these actors could paradoxically improve household welfare – particularly when the value of protection outweighed the costs of informal taxation and when their incentives aligned with the interests of local populations.

Complementing these findings, Lessing and Denyer Willis (2019) analyse the internal governance system of Brazil’s Primeiro Comando da Capital, showing how the group maintains territorial control through mild but well-regulated punishments and a consignment-based drug trade. Taken together, these studies illustrate that criminal actors do not merely seek to capture the state from within; in some cases, they establish parallel forms of authority that substitute or coexist with formal institutions – blurring the line between political influence and criminal governance.

Finally, as the following subsections will explore, criminal governance not only shapes local order but also influences electoral dynamics, facilitates corruption through collusion with state officials, and ultimately undermines public trust in the rule of law.

Electoral Processes

Criminal organisations may infiltrate politics by supporting particular candidates or threatening their opponents. In the case of Italy, researchers have documented how politicians form alliances with criminal networks in exchange for electoral advantages or protection (Buonanno et al. 2016, Daniele and Dipoppa 2017). Alesina et al. (2019) provide additional evidence showing that Italian mafia groups collaborate with local politicians during elections to secure favourable policies or protection from law enforcement. These alliances can undermine democratic accountability and distort public spending, as elected officials may feel compelled to reciprocate support through discretionary contracts or by limiting police intervention. Furthermore, Dal Bó et al. (2006) offer a theoretical model in which criminal groups influence public policy through a mix of bribes and threats – capturing the strategic logic behind many of these interactions.

While alliances with politicians represent one channel of influence, criminal organisations may also shape political outcomes more indirectly through violence, intimidation, and the exercise of criminal governance. In Italy, Daniele and Dipoppa (2017) show that mafia groups often target local politicians with violence after elections in order to condition government activities. In El Salvador, criminal control over territory affects political participation through multiple mechanisms. Cordova (2019) finds that gang dominance reduces both electoral and non-electoral political engagement, discouraging citizens from voting or seeking assistance from public officials. Similarly, Baires et al. (2025) show that the effects of the Residential Voting reform – designed to boost turnout by assigning voters to their nearest polling place – were highly uneven: while turnout and economic activity rose in areas without gangs, the reform’s benefits were offset in gang-controlled zones where people were assigned to polling stations located inside rival gang turf, deterring participation. After a 2012 truce between the government and gangs, however, turnout rebounded in these violent areas and votes shifted toward the ruling party, suggesting that gangs began facilitating electoral engagement in exchange for political benefits.

Corruption

Corruption is widely recognised as one of the most serious crime-related challenges of our time, not only for its corrosive effects on governance, economic performance, political and civil trust (Albanese 2022, Ajzenman 2021, Elliott 1997), but also because it serves as a strategic resource for organised crime. Rather than being a mere by-product of illicit activity, corruption is deliberately cultivated and deployed by criminal organisations to achieve specific goals: to obstruct law enforcement, influence political decisions, gain access to state resources, and secure impunity. In this sense, corruption constitutes a functional pillar of organised crime’s survival and expansion.

Albanese (2025) offers compelling empirical evidence of this dynamic through a comparative analysis of over 500 prosecuted corruption cases from the United States and 50 other countries using SHERLOC, the UN’s legal database on organised crime. His findings reveal that corruption often facilitates organised criminal activity by weakening regulatory oversight, protecting illegal enterprises from state intervention, and enabling transnational operations.

Similarly, Buscaglia and Van Dijk (2005) argue that organised crime and corruption are symbiotic phenomena, flourishing in institutional environments where the mechanisms of state and civil society control are weak or compromised. Their cross-national analysis identifies structural vulnerabilities that make countries more susceptible to both forms of complex crime, and emphasises that these two forces reinforce each other over time.

Organised criminal groups rely on this strategic resource to distort democratic and judicial institutions. Bribery and informal influence allow them to secure public contracts, shape policing priorities, or avoid prosecution (Gamba et al. 2018, Finckenauer 2005). In political contexts, criminal actors may support particular candidates or parties in exchange for regulatory protection or favourable policies. Accardo et al. (2023), for instance, find that higher electoral competition can increase the influence of special interest groups – including criminal organisations – on policymaking. These dynamics compromise state autonomy and turn public institutions into arenas of collusion.

Corruption also enables more systemic, long-term forms of institutional capture. In the Italian case, Barone and Narciso (2015) find that municipalities with mafia infiltration are more likely to receive public subsidies and in larger amounts, and show that organised crime fosters episodes of corruption within public administration. Similarly, Daniele and Geys (2015) show that mafia infiltration reduces the quality of elected officials – often measured by lower education levels – suggesting that criminal networks may help promote more pliable or complicit candidates. The long-term consequences of such corruption are substantial: Pinotti (2015) estimates that organised crime in Italy has reduced GDP per capita by 16% over a 30-year period, highlighting the deep institutional and developmental toll of entrenched criminal influence.

This corruption-organised crime nexus also distorts private economic behaviour. Mallon and Fainshmidt (2022) show that in contexts of pervasive extortion by organised crime, entrepreneurs often choose to operate in the informal sector to avoid becoming targets. By staying off the radar of both state and criminal actors, informal firms seek to minimise exposure to predatory demands. This highlights how criminal organisations not only exploit existing institutions but also reshape incentives within them, creating shadow institutional environments that constrain formal economic activity.

Finally, despite broad consensus on the harm caused by corruption, there is less agreement on the most effective tools for combating it. One line of research stresses the importance of political institutions – particularly elections – as mechanisms for curbing rent-seeking and holding public officials accountable (Ferraz and Finan 2008, 2011, Bobonis et al. 2016). Another strand focuses on judicial and prosecutorial capacity, suggesting that strong legal consequences can deter public malfeasance (Becker 1968, Becker and Stigler 1974). Recent empirical work has also explored the impact of transparency and oversight mechanisms. For example, Avis et al. (2018) analyse Brazil’s randomised audit programme and find that previous audits reduce future corruption by 8% and increase the likelihood of legal action by 20%. These findings suggest that anti-corruption policy can be effective when it raises the perceived legal and reputational costs of misconduct, reinforcing both political and judicial accountability.

Trust

The presence of organised crime can undermine trust between citizens and the state. In areas where gangs impose extra-legal taxes and intimidate residents, individuals may see formal institutions as unable or unwilling to provide security. They may avoid contacting the police or going to court, which hinders the rule of law (Blattman et al. 2025). Citizens might even perceive some criminal organisations as more reliable than government agents, at least in terms of dispute resolution, an outcome documented in some neighbourhoods of Medellín and Rio de Janeiro (Blattman et al. 2025, Blattman 2025, Magaloni et al. 2020).

Empirical studies across different contexts confirm this pattern. Using LAPOP data for Colombia (2004–2010), Blanco and Ruiz (2013) find that crime victimisation, bribery, and armed conflict reduce satisfaction with democracy and trust in institutions – a result consistent with prior work on Mexico (Blanco 2012). Corbacho et al. (2015) show that crime victimisation significantly lowers trust in the local police across Latin America, although it does not consistently affect horizontal trust. Similarly, Singer et al. (2019), using data from the United States, Mexico, Argentina, and Brazil, find that fear of crime – triggered by victimisation – systematically reduces trust in the police, courts, and criminal justice institutions. In Italy, Rolla and Justino (2022) show that exposure to organised crime weakens political participation and both institutional and interpersonal trust, largely due to fear, resignation, and frustration with the state’s inability to act. Nonetheless, recent findings suggest a more complex picture: Campedelli et al. (2023) demonstrate that exposure to news about organised crime can sometimes produce a ‘rally effect’, temporarily increasing trust in state institutions and perceptions of government performance.

For full reference list see the end of the conclusion chapter.