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Scholar Spotlight: Diana Van Patten

Worker mobility and economic growth in the banana republics

April 14, 2021


Alyssa Augustine Content Strategy and Engagement Supervisor
Diana Van Patten
DIANA VAN PATTEN, Assistant Professor of Economics, Yale University School of Management (Fall 2021)
Scholar Spotlight: Diana Van Patten

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
Alyssa Augustine
Content Strategy and Engagement Supervisor

Alyssa Augustine oversees social media and digital engagement, leads the Bank's content strategy, and manages media relations for President Neel Kashkari and other Bank leaders. An experienced TV journalist, Alyssa also contributes articles to the Bank's website and publications.