Threshold of shadows: Unveiling organised crime in Italian municipal public procurement

This paper investigates the complicity of local public buyers in enabling the diversion of resources to organised crime through the manipulation of contract values in public works and services. Exploiting a discontinuity in anti-mafia screening procedures, we analyse a comprehensive dataset of public procurement contracts issued by Italian municipalities spanning from 2007 to 2019. Bunching estimators reveal a distinct pattern of contract value manipulation occurring just below the anti-mafia screening threshold of €150,000, with a heightened concentration observed in public works projects and provinces characterised by a higher prevalence of mafia influence. Our empirical analysis further shows that bunching is significantly more pronounced in municipalities that are later dissolved for mafia infiltration. Contracts below the threshold are also more likely to involve limited competition and to be awarded to firms with financial traits consistent with the hypothesis of mafia infiltration. By following the full procurement chain - from the design of the contract, to how competition is shaped, to who ultimately wins - we provide new evidence of collusion risks in local procurement, and highlight the importance of enhanced safeguards to counter corruption and organised crime within public procurement processes.