Scandinavian Working Papers in Economics
Working Papers in Economics,
University of Gothenburg, Department of Economics
No 532: Origins of the Sicilian Mafia: The Market for Lemons
Arcangelo Dimico (), Alessia Isopi () and Ola Olsson ()
Additional contact information
Arcangelo Dimico: Queen's University, Postal: Belfast, Ireland, UK
Alessia Isopi: University of Manchester, Postal: Manchester, UK
Ola Olsson: Department of Economics, School of Business, Economics and Law, Göteborg University, Postal: P.O.Box 640, SE 40530 Göteborg, Sweden
Abstract: Since its first appearance in the late 1800s, the origins of the Sicilian mafia have remained a largely unresolved mystery. Both institutional and historical explanations have been proposed in the literature through the years. In this paper, we develop an argument for a market structure -hypothesis, contending that mafia arose in towns where firms made unusually high pro…ts due to imperfect competition. We identify the produc- tion of citrus fruits as a sector with very high international demand as well as substantial fixed costs that acted as a barrier to entry in many places and secured high profits in others. We argue that the mafia arose out of the need to protect citrus production from predation by thieves. Using the original data from a parliamentary inquiry in 1881-86 on Sicilian towns, we show that mafia presence is strongly related to the production of orange and lemon. This result contrasts recent work that emphasizes the importance of land reforms and a broadening of property rights as the main reason for the emergence of mafia protection.
Keywords: mafia; Sicily; protection; barrier to entry; dominant position
JEL-codes: P48
43 pages, May 2, 2012
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