On The Macroeconomic Impact of the Organized Crime, a Neo-Kaleckian Perspective

The presented paper analyses how organized crime affects the economy through its impact on the effective demand, by following the Neo-Kaleckian approach. From this perspective, the operation of organized crime, on the one hand, tends to reduce the effective demand draining resources through extortion, corruption of public officials and encouraging consumption ofcriminal goods (illegal goods and goods produced in the underground economy), on the other hand, tends to rise the effective demand using proceeds of criminal activity in the purchase of legal consumption goods and legal investment goods. The model highlights the opposing action of these two forces and identifies the conditions for a negative impact on the degree of capacity utilization and the growth rate. For the latter, these conditions tend to be more stringent, due to the direct impact of organized crime on investment decisions. Overall, the operation of organized crime tends to influence negatively the economic activity to the extent that the income drained from the legal sector is not reused into the same sector.