Since its first appearance in the late 1800s, the origins of the Sicilian mafia have remained a largely unresolved mystery. Both institutional and historical explanations
have been proposed in the literature through the years. In this paper, we develop an
argument for a market structure-hypothesis, contending that mafia arose in towns where
firms made unusually high profits due to imperfect competition. We identify the produc
tion of citrus fruits as a sector with very high international demand as well as substantial
fixed costs that acted as a barrier to entry in many places and secured high profits in
others. We argue that the mafia arose out of the need to protect citrus production from
predation by thieves. Using the original data from a parliamentary inquiry in 1881-86
on Sicilian towns, we show that mafia presence is strongly related to the production of orange and lemon. This result contrasts recent work that emphasizes the importance of land reforms and a broadening of property rights as the main reason for the emergence
of mafia protection.