Regulatory certification, informal governance, and productivity under weak state capacity

Abstract

Abstract This paper examines firm-level productivity differences among Sicilian firms characterized by varying degrees of compliance with anti-Mafia regulatory frameworks. Utilizing data from 2013 to 2021, we find that firms operating in public procurement without formal anti-Mafia certification consistently exhibit higher total factor productivity (TFP). These productivity differentials are more pronounced in provinces characterized by higher Mafia intensity and are negligible in areas with stronger institutional enforcement. The observed productivity patterns suggest potential competitive asymmetries stemming from institutional dualism: the coexistence of formal compliance frameworks and informal governance mechanisms. The analysis highlights the complex interaction between organized crime, regulatory compliance, and firm productivity, underscoring the challenges faced by regulatory frameworks in contexts characterized by weak or uneven institutional enforcement.