Ricerc@Sapienza

adverse effects on competition and legal businesses; on the other hand, there are benefits through
(shadow) employment and income in less-developed areas, as well as benefits through relations of
political clientage. We focus on counterfeiting and its economic effects on trade in Italy during the
economic crisis. Using a newly built regional dataset and a dynamic panel model, we find evidence
of the dual impact of counterfeiting. The production (and exchange) of fake goods depresses the
legal market that relies on intellectual property rights but supports shadow-economic activities for
the benefit of illegal workers, criminal organisations, and political clientele. We show that the
negative effects outweigh the positive effects.