Private States and the Enforcement of Property Rights - Theory and Evidence on the Origins of the Sicilian Mafia

39 Pages Posted: 14 Jan 2002

See all articles by Oriana Bandiera

Oriana Bandiera

London School of Economics & Political Science (LSE) - Suntory and Toyota International Centres for Economics and Related Disciplines (STICERD); Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics

Date Written: January 2002

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.

Keywords: Protection, property rights enforcement, common agency, Sicily-history

JEL Classification: C70, D23, O17

Suggested Citation

Bandiera, Oriana, Private States and the Enforcement of Property Rights - Theory and Evidence on the Origins of the Sicilian Mafia (January 2002). Available at SSRN: https://ssrn.com/abstract=296871

Oriana Bandiera (Contact Author)

London School of Economics & Political Science (LSE) - Suntory and Toyota International Centres for Economics and Related Disciplines (STICERD) ( email )

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+44 20 7955 7519 (Phone)
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Centre for Economic Policy Research (CEPR)

London
United Kingdom

IZA Institute of Labor Economics

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Germany

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