No. 1180 - On the unintended effects of public transfers: evidence from EU funding to Southern Italy

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by Ilaria De Angelis, Guido de Blasio and Lucia Rizzica June 2018

The paper investigates the relationship between public transfers and white collar crimes at the local level. The transfer of a large amount of financial resources from a central level of government can reduce the accountability of local administrators and create incentives for them to grab rents. The analysis draws on data from the EU structural funds to Southern Italy between 2007 and 2014.

We find a positive correlation between the amount of EU funds and the number of white collar crimes in the recipient municipality: a 10% increase in the amount of funds is correlated with a 0.4% increase in the number of white collar crimes. While this estimate may be partially biased, a number of robustness checks support a possible causal interpretation of the results. Hence the importance of a policy of strict control over the assignment, disbursement and management of the funds.