The research community
at the Institute includes
visiting scholars, consultants,
economists, and research
analysts. These scholars bring
a diversity of backgrounds,
interests, and expertise to
research that deepens our
understanding of economic
opportunity and inclusion as
well as policies that work to
improve both. We talked with
four of them about their work.
When a multinational corporation moves into a developing
economy, it would be reasonable to wonder how much
power workers wield over their employers.
The United Fruit Company (UFC), one of the largest
multinationals of the 20th century, was born out of undeveloped
land in Costa Rica and controversially
inspired the term “banana republic.”
For visiting scholar Diana Van Patten,
the question was: When a multinational
corporation starts production, what do host
countries and residents get in exchange?
UFC was spending more per capita on
local amenities than the Costa Rican government.
“The company was investing a
lot of money in … hospitals, schools, parks,
[and] housing for its workers,” said Van Patten, a native Costa
Rican. “What was forcing this company—that the Latin American
narrative has always depicted as a villain—to do good?”
Company reports indicate that UFC was having trouble
retaining its workforce, primarily due to competition for
labor from the coffee sector. Without housing and schools
for their families within the UFC, workers returned home,
forcing the company to replace them.
Worker mobility, powered by valuable alternatives,
led to UFC’s investment and to large, persistent positive
effects for the community, Van Patten finds.
Using data from 1973 to 2011 to compare outcomes
on either side of plantation borders, Van Patten finds that
households inside the UFC have had better living standards
than households in other comparable locations.
“The way companies shared profits was not only through
wages, but also through local amenities … which is important
to attract workers to a region whenever these amenities
are underprovided,” said Van Patten.
Had worker mobility been lower, the outcomes would
have been very different. In these cases, the company can
“set the wage in their area and potentially exploit the worker,”
said Van Patten.
In fact, worker welfare is lower than if there were no
company at all.
While Van Patten says her findings do apply to developed
economies, her perspective on inclusive growth is
also international and is reflected by her research agenda.
“Inclusive growth should not leave developing countries
behind; understanding the challenges and opportunities
that these countries face is key.”
More Scholar Spotlights from this issue