Multinationals, Monopsony, and Local Development: Evidence from the United Fruit Company

Esteban Méndez-Chacón and Diana Van Patten

No 46, Opportunity and Inclusive Growth Institute Working Papers from Federal Reserve Bank of Minneapolis

Abstract: This paper studies the short- and long-run effects of large firms on economic development. We use evidence from one of the largest multinationals of the 20th century: the United Fruit Company (UFCo). The firm was given a large land concession in Costa Rica—one of the so-called "Banana Republics"—from 1899 to 1984. Using administrative census data with census-block geo-references from 1973 to 2011, we implement a geographic regression discontinuity design that exploits a quasi-random assignment of land. We find that the firm had a positive and persistent effect on living standards. Company documents explain that a key concern at the time was to attract and maintain a sizable workforce, which induced the firm to invest heavily in local amenities that can account for our result. Consistent with this mechanism, we show, empirically and through a proposed model, that the firm's welfare effect is increasing in worker mobility.

Keywords: Long-run development; Monopsony power; Foreign firms (search for similar items in EconPapers)
JEL-codes: F23 N16 O43 (search for similar items in EconPapers)
Pages: 78
Date: 2021-03-15
New Economics Papers: this item is included in nep-his
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

Downloads: (external link)
https://www.minneapolisfed.org/institute/working-papers-institute/iwp46.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedmoi:90267

DOI: 10.21034/iwp.46

Access Statistics for this paper

More papers in Opportunity and Inclusive Growth Institute Working Papers from Federal Reserve Bank of Minneapolis Contact information at EDIRC.
Bibliographic data for series maintained by Kate Hansel ().