Q&A: Diana Van Patten and Esteban Méndez
By Bomi Okuyiga
May 22, 2023
Costa Rica’s ambitious development agenda in trade, foreign investment and digital inclusion has solidified its status as one of the most innovative economies in Latin America. Backed by a referendum, a landmark free trade agreement with the United States – the CAFTA-DR – strengthened the country’s relationship with its main trading partner.
On the digitalization front, in 2015, Costa Rica created the National System of Electronic Payments for Mobile Payments, known as SINPE Móvil. SINPE Móvil is an electronic payment system that works across different banking entities, allowing users to send money to peers.
Several international institutions and academics have heralded Costa Rica as a prime example of the power of open and innovation-friendly economies in facilitating economic transformation. What is even more notable about Costa Rica’s progress is the central role government institutions have played in creating these products and markets – the Central Bank of Costa Rica developed and rolled out SINPE Móvil.
This rollout is the focus of ongoing research by Diana Van Patten, an Assistant Professor of Economics at Yale University's School of Management, and Esteban Méndez, a researcher at the Central Bank of Costa Rica. In an interview with EGC, Van Patten and Méndez discussed the role of incentives in promoting digital payments in Costa Rica, as well as their analysis of a national referendum on whether to approve a free trade agreement. The two economists originally met as undergraduate students in Costa Rica, became longstanding research partners – and Méndez recently spent time in New Haven as part of EGC’s Kuznets Visitors Program, which launched in the 2022-23 academic year.
Your latest area of research brings Costa Rica’s digital payment system to the spotlight. Can you say more about the question you’re exploring?
Van Patten: Our latest paper analyzes the adoption of digital payments in developing countries, focusing on Costa Rica. Along with three other co-authors, we study the mobile payment system that the Central Bank of Costa Rica launched in 2015, which over 70% of the adult population now uses. It’s used intensively – last year, transactions in the platform accounted for over 15% of Costa Rica’s GDP. The central bank has detailed data on adoption of the app, so we’ve been studying those issues. For instance, what determines whether a new technology is adopted widely? In particular, we quantify the growth of user networks – also known as strategic complementarities – in determining adoption. We also study if the current adoption level is optimal, if there should be a subsidy for it, and how to quantify that subsidy.
How did the relationship you both have with the Central Bank of Costa Rica help you to undertake this research?
Méndez: After receiving my Ph.D. in economics from Cornell University, I returned to Costa Rica and now I work in the central bank’s research department. I split my time between doing academic research (like my work with Diana), and doing policy work. Since the data we are using is confidential, one of the requirements for using it is working through the central bank. My policy work at the Central Bank also plays an important role in developing the research ideas we continue to work on.
Van Patten: Esteban is at the core of Costa Rica’s work on these policies and has so much institutional knowledge. For example, he regularly talks to the professionals who oversee the payment system. This means we can ask questions firsthand.
Méndez: It’s very good to understand the institutional context – and that can also give you insights into what things are working or what can be done.
You’ve both been co-authors on multiple papers. How did you start working together?
Van Patten: We met during our undergraduate studies in Costa Rica, more than twelve years ago – Esteban was actually my TA in microeconomics! After graduating, we both started a program at the Central Bank for students interested in pursuing a Ph.D. program in economics – they allowed you to take math classes and other Ph.D. prerequisites while working at the bank. Esteban and I would take the same bus from the bank to classes, then come back to the bank together. That was a real bonding experience, and then we applied to Ph.D. programs at the same time. Since then, we’ve just kept working together.