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The middle class and the development process

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  • Solimano, Andrés
Abstract
Stable, higher income democracies often have both a strong middle class and relatively low levels of inequality. In contrast, lower and middle income countries with highly unequal patterns of income distribution and stratified social structures often have a weak middle class, more social conflict and a tendency to populist and/or authoritarian politics. This paper investigates, for a sample of more than 120 countries, some empirical correlations between the size of the middle class and the following set of variables: the level (mean); of per capita income and wealth, the degree of inequality (Gini coefficients); of per capita income and wealth, the level and composition of public expenditure, the share of small and medium size enterprises in employment and output and an indicator of democracy. Our results show that in high income economies the relative size of the middle class (using a broad definition of deciles 3 to 9); is near 6 percentage points higher than the share of the middle class in low income countries, suggesting a positive relationship between the level of economic development measured by per capita income levels and the share of the middle class. However, the relationship between the share in income of the middle class and the level of per capital income is non-linear and shows more dispersion for low and middle income countries with per capita income below US$ 10,000 than for rich economies. We found weak correlations between the share of the middle class and the level of public spending and the relative size of the small and medium size enterprises (measured both as shares of total employment and total output);. When we correlate an index of democracy and the middle class shares we find little or no correlation between both variables except for the group of high-income economies.

Suggested Citation

  • Solimano, Andrés, 2008. "The middle class and the development process," Macroeconomía del Desarrollo 5432, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    • Handle: RePEc:ecr:col037:5432
    Note: Includes bibliography
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    File URL: http://repositorio.cepal.org/handle/11362/5432
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    References listed on IDEAS

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    1. Birdsall, N. & Graham, C. & Pettinato, S., 2000. "Stuck in the Tunnel: Is Globalization Muddling the Middle Class?," Papers 14, Brookings Institution - Working Papers.
    2. Branko Milanovic, 2006. "Global Income Inequality," World Economics, World Economics, 1 Ivory Square, Plantation Wharf, London, United Kingdom, SW11 3UE, vol. 7(1), pages 131-157, January.
    3. Branko Milanovic, 2005. "Global Income Inequality: What It Is And Why It Matters?," HEW 0512001, University Library of Munich, Germany.
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    1. Paul Andres Corral Rodas & Vasco Molini & Gbemisola Oseni, 2019. "No Condition is Permanent: Middle Class in Nigeria in the Last Decade," Journal of Development Studies, Taylor & Francis Journals, vol. 55(2), pages 294-310, February.
    2. Gustavo Canavire‐Bacarreza & Michael Jetter & Marcos Robles, 2018. "When Does Economic Growth Reduce Poverty and Strengthen the Middle Class? A State‐Level, Sector‐Specific Analysis of Peru," Southern Economic Journal, John Wiley & Sons, vol. 84(4), pages 1067-1087, April.
    3. Guillermo Cruces & Luis Felipe López Calva & Diego Battistón, 2011. "Down and Out or Up and In? Polarization-Based Measures of the Middle Class for Latin America," CEDLAS, Working Papers 0113, CEDLAS, Universidad Nacional de La Plata.
    4. Alberto Batinti & Joan Costa‐Font, 2020. "Do economic recessions “squeeze the middle class”?," Economics and Politics, Wiley Blackwell, vol. 32(3), pages 335-355, November.
    5. Mariam Shahzadi & Muhammad Faraz Riaz & Sofia Anwar & Samia Nasreen, 2017. "How unequal is the size of middle class in the rural urban areas of Punjab province," International Journal of Social Economics, Emerald Group Publishing Limited, vol. 44(2), pages 253-266, February.
    6. Xavier Ordeñana & Ramon Villa, 2014. "Mobility and Entrepreneurship in Ecuador: A Dynamic Pseudo-Panel Approach," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 51(2), pages 307-341, November.
    7. Vasiliy A. Anikin & Yulia P. Lezhnina & Svetlana V. Mareeva & Ekaterina D. Slobodenyuk & Nataliya N. Tikhonovà, 2016. "Income Stratification: Key Approaches and Their Application to Russia," HSE Working papers WP BRP 02/PSP/2016, National Research University Higher School of Economics.
    8. Xavier Ordeñana & Ramon Villa, 2012. "Mobility and Entrepreneurship in Ecuador: A Pseudo-Panel Approach," Research Department Publications 4783, Inter-American Development Bank, Research Department.
    9. Esteban Cabrera Cevallos & Edwin Buenaño, 2018. "¿Ha crecido la clase media en el Ecuador? Un análisis mediante índices de polarización del ingreso para el periodo 2007-2014," Revista de Economía del Rosario, Universidad del Rosario, vol. 21(1), pages 121-152, June.
    10. Ordeñana, Xavier & Villa, Ramón, 2012. "Mobility and Entrepreneurship in Ecuador: A Pseudo-Panel Approach," IDB Publications (Working Papers) 4027, Inter-American Development Bank.
    11. María Gómez-León, 2015. "The Rise of the Middle Class, Brazil (1839-1950)," Working Papers 0091, European Historical Economics Society (EHES).
    12. Ordeñana, Xavier & Arteaga, Elizabeth, 2012. "Middle-Class Entrepreneurship and the Effect of Social Capital," IDB Publications (Working Papers) 4037, Inter-American Development Bank.
    13. Schotte, Simone, 2017. "The Anxious and the Climbers: Ambivalent Attitudes towards Democracy among South Africa's Middle Class," GIGA Working Papers 304, GIGA German Institute of Global and Area Studies.
    14. Vyacheslav Bobkov & Peter Herrmann & Igor Kolmakov & Yelena Odintsova, 2018. "Two-Criterion Model of the Russian Society Stratification by Income and Housing Security," Economy of region, Centre for Economic Security, Institute of Economics of Ural Branch of Russian Academy of Sciences, vol. 1(4), pages 1061-1075.
    15. Simone Schotte & Rocco Zizzamia & Murray Leibbrandt, 2017. "Social stratification, life chances and vulnerability to poverty in South Africa," SALDRU Working Papers 208, Southern Africa Labour and Development Research Unit, University of Cape Town.
    16. repec:cte:whrepe:wp15-09 is not listed on IDEAS
    17. Andrés Solimano, 2009. "Three Decades of Neoliberal Economics in Chile: Achievements, Failures and Dilemmas," WIDER Working Paper Series RP2009-37, World Institute for Development Economic Research (UNU-WIDER).

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