The Spatial Impact of Judicial Administration on Firms' Performance

ABSTRACT

This paper investigates the indirect effects of judicial adminstration (JA) on neighbouring firms operating in southern Italian regions characterised by endemic organised crime. When a mafia‐affiliated firm is placed under JA, the sector‐specific relational networks it sustained are abruptly severed. Using difference‐in‐differences estimators, we find negative spillovers on other firms operating within a 10‐km radius of the sanctioned enterprise: average cumulative effects of on revenues, on employment, and on value added. Effects intensify with sectoral proximity and attenuate with physical distance, consistent with the disruption of territorially embedded mafia networks.