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April 2012


IIIS Research Associate, Gaia Narciso's, paper features in article written in the The Wall Street Journal

The Effect Of Mafia On Public Transfers
Gaia Narciso, IIIS Research Associate and Assistant Professor, TCD Department of Economics and colleague Guglielmo Barone, Bank of Italy

Organized crime is widely regarded as damaging to economic outcomes. Yet little is known about the mechanism at work. This paper contributes to filling this gap by analyzing the impact of organized crime on the allocation of public subsidies to businesses. We focus on Sicilian mafia and measure its presence using a unique data set, which provides detailed information on crime at municipality level, by article of the Italian Penal Code, over the period 2004-2009. Public transfers are measured by aggregating the amount of funds transferred to firms at municipality level under Law 488/92. These funds have for many years been the main policy instrument for reducing territorial disparities in Italy by offering a subsidy to businesses willing to invest in poorer regions. The research finds that:
  • Mafia diverted about 35% of the total amount of public transfers.
  • Organized crime pockets at least part of the disproportional amount of funds by creating fictitious firms and by corrupting public officials who play a role in the funding allocation.
  • The positive relationship between mafia presence and public transfers is not due to a more generous attitude of the State towards areas with mafia presence. If anything, these areas are underfunded in terms of expenditure on education relative to those where mafia is absent.

The results indicate that the design of geographically targeted aid policies, such as European Structural Funds, should be supported by detailed analysis of local crime activities, in order to prevent that part of the money feeds into organized crime.


 

26th October 2011

Austerity is the least disruptive option, says analyst

by Brendan Keenan, The Irish Independent, 26th October 2011

BOND investors need to have confidence that the rules are not going to change if they are to lend again to troubled eurozone economies at affordable rates, one of the best-known analysts of the euro crisis told a seminar yesterday.

Ciaran O'Hagan, a senior analyst with Societe Generale in Paris, said the ECB's 90bn euro purchases of mainly Italian and Spanish bonds may not bring yields down because investors feel more insecure in their rights to repayment compared with the ECB, which would be protected from any "haircut".

Mr O'Hagan, one of four participants in the Henry Grattan lecture -- organised by the Trinity College-based Institute for International Integration Studies -- said debt default would not do away with the need for fiscal austerity. He believed that correcting budget deficits through an austerity programme was the least disruptive policy.

"With austerity, you take a lot of upfront pain for long-term gain," he said.

But the long term could be very long, according to Mike Dooley of University College Santa Cruz, a former IMF executive who worked on the Latin American crisis in the 1980s.

He believes that there will be no Greek default because it would "immediately put Italy into play".

"I think it's not going to happen and they will push it down the road," he said, arguing that the ECB and eurozone governments would pay off the banks as their loans fall due.

Risk

"The losers are the residents of the debtor countries because investors will not invest while this process is going on and it can last a long time."

Mr Dooley said this was what happened for 10 years in the 1980s until Mexico refused to continue because of the effects on its economy.

"I think it will be five or six years until everybody faces up to debt restructuring in the euro area," Mr Dooley said.

Peter Boone of Salute Capital Management, who lectures at the London School of Economics, said a risk premium would go right through eurozone interest rates as a result of the Greek default, which he saw as inevitable.

"Risk premia will stay high. You have to get back to making people comfortable about sovereign debt again," he said.

He added: "The ECB could be a backstop for countries while they solve their fiscal problems, but that could be highly inflationary."

Jean Pisani-Ferry, director of the Bruegel thinktank in Brussels, pointed out that the eurozone could not be another US.

"The biggest state debt is that of California, but it is only one percent of US GDP. The debt of little Greece is 4pc of eurozone GDP and Italy's is 20pc."

However, some kind of fiscal union seemed the best long-term solution.

"That raises the whole question of who will exercise control. We are talking about the fundamentals of democracy."

He added: "One cannot imagine some czar, in Brussels or elsewhere, telling national parliaments what to do. We are very far from an EU parliamentary body but we have to start thinking about it."


September 2009

Professor Patrick Honohan appointed Governor of the Central Bank Professor of International Financial Economics and Development, Patrick Honohan, has been appointed the next Governor of the Central Bank by the Minister for Finance, Mr. Brian Lenihan T.D. Professor Honohan will be the first academic to hold this post when he takes on the position later this month. Patrick Honohan is Professor of International Financial Economics and Development in the Department of Economics. Previously he was a Senior Advisor in the World Bank working on issues of financial policy reform.During the 1980s he was Economic Advisor to the Taoiseach and spent several years at the Economic and Social Research Institute, Dublin, and at the Central Bank of Ireland.

A graduate of UCD and of the London School of Economics, from which he received his PhD in 1978, Professor Honohan has published widely on issues ranging from exchange rate regimes and purchasing-power parity, to migration, cost-benefit analysis and statistical methodology. Announcing the Government's selection of Professor Honohan for the position of Governor, the Minister for Finance stated: “Professor Patrick Honohan is highly regarded internationally as an expert on banking and financial systems. His experience in the various positions he has held during his career, including the Central Bank, the World Bank and the academic world will be of enormous value to him in working through the difficulties which the Irish Financial System faces”. “Throughout this financial crisis I have sought the views of Professor Honohan and he has consistently provided valuable advice. I look forward to working with him in his new role,” Minister Lenihan concluded. Professor Patrick Honohan's full Curriculum Vitae may be viewed at http://www.tcd.ie/Economics/staff/phonohan/


Last updated 27 April 2012 by IIIS (Email).