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Illegal waste disposal in the time of the mafia: a tale of enforcement and social well being

2012; Taylor & Francis; Volume: 55; Issue: 5 Linguagem: Inglês

10.1080/09640568.2011.620324

1360-0559

Alessio D’Amato, Mariangela Zoli,

Regulation and Compliance Studies

Abstract The current waste crisis in Italy is the most recent evidence that criminal organisations can impact waste management heavily. Nonetheless, this aspect has been neglected by current literature. We take the first step in filling this gap by developing a model which allows for the presence of a criminal organisation which extorts (socially costly) rent from agents willing to perform illegal disposal. In a setting where the public authority acts as a Stackelberg leader with respect to the mafia, we assume, coherently through real life observation, that enforcement efforts can only hit the criminal organisation: agents are therefore subject to indirect enforcement via the mafia extortion. Our main conclusion suggests that the presence of the mafia can lead to an increase in the level of economic activity and to less enforcement; under certain conditions, the related benefits can offset the damages from increases in illegal disposal and the social costs of the mafia's rent. These results provide a possible theoretical rationale for authorities' tolerance of the mafia in the waste cycle, and contribute to the explanation of some surprising stylised facts in the Italian case. Keywords: waste policyorganised crimeenforcement Acknowledgements The authors would like to thank Andrea Attar, Gianni De Fraja, Massimiliano Mazzanti and Tommaso Valletti, two anonymous referees as well as audience at the March 2009 IAES conference, 2009 EAERE, 2010 WCERE and SIEP annual conferences, and seminar audience at Tor Vergata University, University of Ferrara and NERI – University of Chieti-Pescara. All errors are authors' responsibility. Notes 1. Such a role is now documented in various reports by the National Commission on Waste Management and Related Crimes (see, for instance National Commission on Waste Management and Related Crimes 2000) and Legambiente, as well as by other publications in the field (among others, Bianchini and Sicurella 2007). 2. The state of emergency was declared in Campania in 1994 due to the saturation of regional landfills and the consequent garbage accumulation in the streets. To face the crisis, full power for waste management was delegated to a special authority, the Committee for the Waste Emergency in Campania (Commissariato di Governo per l'emergenza rifiuti in Campania). Despite this policy action, the crisis in waste collection and disposal has continued and has prompted health concerns related to soil and water contamination, as well as to air pollutants released by illegal burning of piles of trash. 3. An exception under an empirical point of view is D'Amato et al. (2011). 4. Though quite general, such a setting is coherent with the institutional framework for special waste in Italy, where firms earn profits from the treatment of special waste and pay a tax on the amount of landfilled waste. As the treatment firms are perfectly competitive, the results are not expected to change in qualitative terms if the landfill tax is paid directly by waste producing agents. 5. A detailed discussion of the strategies adopted by the mafia in waste management is provided in Section 6. 6. See, among others, Garoupa (2007) and Kumar and Skaperdas (2009). We will add further discussion in Sections 5 and 6. 7. In our setting, costs related to legal disposal are to be intended in a broad sense, for example including treatment costs and/or costs related to compliance with extended producer responsibility provisions, which imply decreasing returns (see, for example, Walls and Palmer 2001). 8. Consider, for instance, the landfill tax that must be paid by waste treatment firms on the portion of waste that is disposed of in landfills. 9. In order for b f to be positive, a necessary condition is that α>γ. 10. To keep the model tractable we assume that the firm is audited in an unexpected way and cannot change b after realising. Further, the expected unit fine is assumed not to vary with b. For a discussion of the implications of such hypothesis see, for example, Malik (1990). 11. The waste treatment firm simply covers its costs and is not explicitly modelled in the games, both in the absence and in the presence of the mafia. 12. We focus on internal solutions and disregard the extreme case where agents dispose of all waste illegally. 13. By setting F=γ and t=δ, Equations (5) and (6) would replicate Equations (3) and (4). 14. The tax revenue is intended as a net social transfer, featuring no impact on social welfare. The same holds with respect to the total expected fine. 15. To guarantee that Fn , tn and bn are all strictly positive, we assume 16. The leader–follower setting has been deemed as the most suitable to describe the specific waste policy setting, where the criminal organisation reacts to the regulatory framework. As a consequence, the mafia can be accounted for as follower (see Legambiente 2008). 17. Fixed entry costs are thus adjusted so that . A necessary condition is that the rent gross of fixed costs is nonnegative, i.e. 18. Social costs related to the mafia rent can be justified by violence in extortion and/or deadweight losses from rent seeking activities. 19. Indeed, notice that (x−φ) decreases with φ, as one unit increase in φ increases x by less than 1, while b decreases with x and, therefore, with φ. 20. Indeed, it is easily shown that F n >xo if γ>γ o where . 21. Notice also that , while . As the sum decreases with γ, i.e. the larger is γ, the smaller is the level of economic activity in the absence of the mafia, as compared to the one arising in its presence. 22. Above γφ, where 23. Indeed: and so that an increase in γ leads to a smaller increase in legal disposal and a smaller decrease in illegal disposal in the presence of the criminal organisation. The same conclusion, but with reversed signs, can be derived with respect to δ, as and 24. The most common method is known as "giro bolla" (invoice switch): toxic waste is taken from the producer and transferred to an intermediate storage centre, where accompanying documents are falsified and waste is declassified from hazardous to non-hazardous without undergoing any treatment (see National Commission on Waste Management and Related Crimes - Commissione Parlamentare di inchiesta sul ciclo dei rifiuti e sulle attività illecite ad esso connesse (2000) and Legambiente 2007). 25. As a proxy of the enforcement effort we have adopted the only available data, i.e. the number of police controls over all environmentally related crimes. It is obviously true that a potential correlation between established crimes and controls can exist, even though it is difficult to establish the direction of the correlation (the number of controls can affect the number of crimes and vice versa). Nevertheless, the data provide useful insight into State engagement in contrasting illegal waste disposal. In order to partially account for correlation between the two variables, we have considered two consecutive years. Results we comment in the text are stable over the two years. 26. Tables 1 and 2 also show the population in each Italian region, in order to provide an idea of regional size.