Multinationals and Development: Evidence from the United Fruit Company in Costa Rica Esteban M´endez-Chac´on∗ Diana Van Patteny Cornell University UCLA Preliminary draft. Please do not cite or distribute. Abstract We analyze the impact of large-scale FDI on economic development by considering an agricultural multinational with well-defined boundaries: the enclave of the United Fruit Company (UFCo) in Costa Rica from 1889 to 1984. We implement a geographic regression discontinuity design that exploits a quasi-random assignment of land, and the availability of restricted microdata georeferenced at the census block level for 1973, 1984, 2000 and 2011. The range covered by the censuses allow us to identify the company's effect during its tenure, and assess its short- and long-run impacts after it stopped production. We find a positive, large and persistent effect on key outcomes in areas where the company operated. Households located in former UFCo lands are less likely of being poor and have a better satisfaction of basic needs (housing, sanitation, education, and consumption capacity). Moreover, we validate our finding using nighttime lights data and conclude that the former UFCo areas are relatively brighter, suggesting a higher level of income and economic activity. We propose that the mechanisms behind our results are investments in physical and human capital carried out by the UFCo, such as sanitary and health programs, housing for its employees, and vocational training. ∗
[email protected] [email protected] \It happened once that someone at the table complained about the ruin into which the town had sunk when the banana company had abandoned it, and Aureliano contradicted him with maturity and with the vision of a grown person.