Environmental Crime and Shadow Economy: Evidence from Italy

Anna Rita Germani (Sapienza University of Rome)
Angelo Castaldo (Sapienza University of Rome)


This study investigates the role of the shadow economy on environmental crimes in Italy, using a regional panel dataset over the period 2006-2016. Our main findings, after controlling for socio-economic and judicial inefficiency characteristics, support the existence of a positive relationship between shadow economy and environmental crime, suggesting that increases in the shadow economy will increase environmental crime, adversely affecting the protection of the environment. The results are robust to model specifications and endogeneity. Moreover, we find that regions in which there are higher levels of corruption are more likely to experience higher levels of environmental crime; the intuition behind this result is that corruption could grease the wheels of environmental crimes. In terms of policy implications, our findings highlight that there is a wide room for efficiency gains in the fight against environmental crime implementing policies aimed to address the main drivers of the shadow economy.

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