Origins of the Sicilian Mafia: The Market for Lemons

In this article, we argue that the mafia arose as a response to an exogenous shock in the demand for oranges and lemons, following Lind's discovery in the late eighteenth century that citrus fruits cured scurvy. More specifically, we claim that mafia appeared in locations where producers made high profits from citrus production for overseas export. Operating in an environment with a weak rule of law, the mafia protected citrus production from predation and acted as intermediaries between producers and exporters. Using original data from a parliamentary inquiry in 1881 -- 1886 on Sicilian towns, the Damiani Inquiry, we show that mafia presence is strongly related to the production of oranges and lemons. The results hold when different data sources and several controls are employed. [...]

Our results are also strongly associated with research on the p "curse of natural resources". We claim that the economic boom in international citrus demand, and the subsequent rise of Sicilian exports during the nineteenth century, are key factors behind the rise of mafia. This is also consistent with the more recent finding that windfall gains from natural resources are often associated with intense rent seeking and patronage politics. For instance, Xavier Sala-i-Martin and Arvind Subramanian (2003) argue that political corruption related to oil revenues hampered Nigeria's growth for decades. Daron Acemoglu, Thierry Verdier, and James A. Robinson (2004) show how mineral wealth in Zaire allowed President Mobutu to buy off political challengers. A recurrent theme in this tradition is that resource windfalls might actually destabilize and deteriorate institutions, if key groups in the society believe that predation is more profitable than production.

Hmmm, 'Key groups believe that predation is more profitable than production', what does that remind me of... Oh right! The entirety of the tech industry!

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