The Value of Connections: Evidence from the Italian-American Mafia ∗ Giovanni Mastrobuoni† September 2013‡ Abstract Using declassified Federal Bureau of Narcotics records on 800 US Mafia mem- bers active in the 1950s and 1960s, and on their connections within the Cosa Nostra network, I estimate network effects on gangsters’ economic status. Lacking informa- tion on criminal proceeds, I measure economic status exploiting detailed information about their place of residence. Housing values are reconstructed using current de- flated transactions recorded on Zillow.com. I deal with the potential reverse causality between the economic status and the gangster’s position in the network exploiting exogenous exposure to potential pre-immigration connections. In the absence of pre-immigration data I use the informational content of surnames, called isonomy, to measure the place of origin. The instrument is valid as long as conditional on the characteristics of the gang- sters (including his region of birth) such exposure influences the gangsters’ position inside the network but not the preference for specific housing needs. A standard deviation increase in closeness centrality increases economic status by about one standard deviation (100 percent). Keywords: Mafia, Networks, Centrality, Housing Prices, Value of Connections, Crime, Surnames, Isonomy. JEL classification codes: A14, C21, D23, D85, K42, Z13 ∗I would like to thank Edoardo Gallo and Michele Pellizzari for their comments. Martino Bernardi, Isabella David, and Dominic Smith have provided excellent research assistance. †Department of Economics, University of Essex,
[email protected]. ‡© 2013 by Giovanni Mastrobuoni. Any opinions expressed here are those of the author. 1 Introduction In January 2011, exactly 50 years after Robert F.