Enforcement against Organized Crime Fosters Illegal Markets: Evidence from the Yakuza
The Yakuza Exclusion Ordinances (YEOs) have been implemented at different times across prefectures in Japan, where it is not illegal to organize or join criminal organizations—the yakuza.
The YEOs indirectly regulate on the yakuza by prohibiting non-yakuza citizens from providing any benefit to them. In Japan, organized fraud has been a serious issue, accounting for almost half of the total financial damage by all property crimes. Difference-in-differences estimates indicate that (i) the YEOs increase the revenue from organized fraud and (ii) the YEOs’ effects are greater in regions with lower concentration levels of yakuza syndicates.
Additional evidence suggests that both current and former yakuza members engage in the fraud in the presence of the YEOs. One policy implication is that the rehabilitation assistance for former yakuza members can be effectively implemented in regions with lower concentration of yakuza syndicates.