Economic Effects of Mafia-Type Organizations on Local Economies

Isabella Gonzalez

Co-Presenters: Rafael Vallejos, Gabriel Avila

College: College of Business and Public Management

Major: BS.ACCOUNTING

Faculty Research Mentor: Meng, Chen  

Abstract:

This research examines how mafia-type organizations affect local economies, focusing on the distinction between short-run economic activity and long-run economic development. Drawing on historical case studies and existing literature, the study analyzes the mechanisms through which organized crime may influence local labor markets, money flows, and systems of informal governance. These mechanisms include employment generation, access to credit through underground financial networks, and short-term increases in spending and investment. At the same time, the paper critically evaluates the conditions under which such effects arise, emphasizing the role of state capacity, market structure, and social norms. The findings suggest that while mafia organizations may contribute to localized and temporary economic activity, these effects are typically accompanied by significant long-term costs, including increased corruption, reduced competition, slower economic growth, and weakened public institutions. By distinguishing between observable economic activity and sustainable economic development, the paper highlights why apparent economic “benefits” associated with organized crime often mask deeper structural harm.