How does territorial control by non-state actors affect long-term development This paper investigates the economic, social, and political consequences of temporary territorial control by guerrillas during the Salvadoran Civil War. During this period, the guerrillas displaced state authorities and promoted the creation of self-governing institutions that were highly representative of local values and openly distrusted the state and elites. Using a spatial regression discontinuity design, the paper shows that areas once under guerrilla control have experienced worse economic outcomes about 30 years after the guerrillas first controlled them, relative to adjacent areas that were then controlled by the formal state. The results suggest that informal community institutions in guerrilla-controlled areas led to enduring land fragmentation and disengagement with the government. The paper argues that when non-state actors develop governance institutions as an alternative to the state, this can lead to negative development effects through lasting norms of distrust of out-groups.