Università Cattolica del Sacro Cuore

Featured research

• Ghisolfi, S. 2022. “Market Access and Quality Upgrading: Evidence from Four Field Experiments”, forthcoming in American Economic Review

Smallholder farming in many developing countries is characterized by low productivity and low quality output. Low quality limits the price farmers can command and their potential income. We conduct a series of experiments among maize farmers in Uganda to shed light on the barriers to quality upgrading and to study its potential. First, we document that quality is indeed low but partly observable with easy and quick procedures by the buyers, therefore it would be possible to reward farmers based on the quality of their produce. Second, we experimentally vary the quality of the maize produced and show that in the existing market the causal return to quality is zero, suggesting that the market for quality maize is effectively missing. Third, to understand if farmers would be willing and able to produce high quality maize when rewarded, we contract with a Ugandan vertically integrated agro trader to generate experimental variation in access to a market for premium quality maize. Following 200 farmers in 20 villages for 7 seasons (i.e. 3.5 years), we document that access to a market for high quality maize, combined with training on agricultural best-practices, produces large increases in maize quality (+60%) and in both farm productivity and income, increasing yields by 15% and mean profits by $63-$98 per season or 36%-81%. While the intervention also increased prices for lower quality maize in the treatment villages, the evidence suggests that the increase in output in the treatment group can fully be accounted for by the subgroup of farmers selling premium quality maize to the high quality buyer. Fourth, in a separate trial following 170 farmers for 6 seasons, we investigate the impact of the training program alone and find no evidence that farmers changed their farm practices, productivity or profits. Our findings reveal the importance of demand-side constraints in limiting rural income and productivity growth.

• Cipullo, D. 2021. “Political Fragmentation and Government Stability. Evidence from Local Governments in Spain”, American Economic Journal: Applied Economics

Unstable governments have been historically associated with fragmented parliaments. Topical cases include the Weimar Republic in Germany and the Fourth Republic in France. Despite the abundance of examples, to date, we lack rigorous evidence on whether the association between fragmentation and stability is indeed causal. The main empirical issue lies in finding exogenous variation in fragmentation, especially when using national-level data. Also, occurrences of instability events at the national level are too uncommon to apply reliable econometric techniques.

A recent work by Davide Cipullo (Università Cattolica), with Carozzi (LSE) and Repetto (Uppsala University), forthcoming in the American Economic Journal: Applied Economics exploits data from 50,000 local elections in Spain (featuring more than 1,000 events of unseated governments), where parties can only enter the municipality council if they receive more than 5% of the votes. Using a Regression-Discontinuity design, the authors compare municipalities where a party receives just less than the required quota – and remains out from the council – with municipalities where a party receives a few more votes than the required quota – and may enter the council.

The empirical results document that the entry of an additional party causes a 5- percentage points increase in the probability that the incumbent mayor is unseated via a vote of no confidence. In relative terms, for each additional party that enters the municipality council, incumbent mayors are 140% more likely to be replaced during the term. Using the empirical results and a simulation method, the authors also show the policy impact of admission thresholds on the stability of incumbent governments. Low entry thresholds (e.g., those requiring a party to receive at least 3% of the votes to participate in the seat distribution) do not reduce instability compared to not having an admission threshold at all. 2 On the contrary, relatively high thresholds (e.g., those requiring at least 5% of the votes) may reduce occurrences of instability substantially.

Le Moglie, M. 2020. “Revealing “Mafia Inc.”? Financial Crisis, Organized Crime, and the Birth of New Enterprises”, Review of Economics and Statistics

Organized crime has strong negative effects on the economy, the society, and the institutions of many countries, but despite these detrimental effects, and the dramatic increase in the public resources deployed to contrast organized crime, it has followed to proliferate. A possible explanation for this persistence relates to the fact that organized crime also represents an important actor within the economy of many countries, generating gains for a part of the population that partially counterbalance its negative impact and reduce the effectiveness of law enforcement.

A recent work by Le Moglie and Sorrenti, now forthcoming at the Review of Economics and Statistics, exploits the 2007-subprime mortgage crisis to detect Mafia's presence in the Italian legal economy. The credit contraction homogeneously hit all the geographic areas, while Mafia presence was stronger in some provinces and weaker in others; Mafia sources of profit and capital were barely dented, as UNODC records, allowing organized crime to invest as usual. If the Mafia invests in the legal economy, the number of newly-established enterprises should thus have decreased less in Mafia-ridden areas than in the rest of the country. That’s exactly what happened, according to the number of firms newly registered in each province in the Registry of Enterprises. The drop was 4% lower, corresponding to a provincial average of 241 enterprises established every year in the post-crisis period due to Mafia investment in the legal economy (28 for every 100,000 inhabitants), and it lowers even further when considering the sector (construction) and legal form (limited liability) most preferred by Mafia.

The analysis suggests that standard repression policies against organized crime need to be complemented by institutional interventions, e.g. provision of credit or programs to enhance employment opportunities, to undermine the roots of the social consensus obtained through its investment in the legal economy.