Land reform, the market for protection, and the origins of the Sicilian mafia: Theory and evidence

Historical records show that the Sicilian mafia developed to protect land from predatory attacks at a time when publicly provided security was scarce and banditry widespread. Using a common-agency model, this article shows that (i) it is optimal for each landowner to voluntarily buy protection even if this results in a worse equilibrium for the landowning class and (ii) all things equal, mafia profits are higher where land is more fragmented. The argument is based on the fact that protection involves an externality, in the sense that by buying protection, each landowner deflects thieves on others' properties. Using qualitative data from a parliamentary survey (1881), the article also shows that in 19th century rural Sicily the mafia was in fact more likely to be active in towns where land was more divided.