Shadow economy or economic driver? The impact of counterfeiting on Italy’s growth

This study investigates the impact of economic crime—specifically counterfeiting—on regional economic growth in Italy during the post-Great Recession period (2008–2019). Despite its growing prevalence, the role of counterfeiting in shaping regional development remains underexplored. Using a unique regional dataset, we distinguish between the overall volume of counterfeit activity and the value of counterfeiting to assess their distinct economic effects. The results reveal a dual dynamic: the volume of counterfeiting is positively associated with short-term economic growth, while the value of counterfeiting, reflecting the infiltration into high-value added sectors, exerts a significantly negative impact. At the aggregate level, the net effect is positive, suggesting that the short-term stimulus from widespread low-value counterfeiting outweighs longer-term structural harm. Importantly, once counterfeiting is accounted for, the explanatory power of traditional growth drivers—such as wages, productivity, investment, and R&D—increases, indicating that illicit activity distorts development trajectories and contributes to persistent regional disparities. These findings highlight the ambivalent role of counterfeiting and point to the need for differentiated policy responses, including stronger enforcement, innovation support, and targeted economic development strategies that promote economic alternatives to counterfeiting.