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Public Policies and the Middle Class throughout the World in the Mid 2000s

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  • Steven Pressman

Abstract

This paper updates and extends my earlier work, published in the Journal of Economic Issues, on how the middle class fares throughout the world. My 2007 paper provided a definition of the middle class as well as estimates of the size of the middle class in several nations. It argued that the fraction of households that are middle class across nations and over time is mainly determined by government tax and spending policies. The more progressive the national tax system, and the more generous government spending programs, the larger is the proportion of middle-class households. This empirical work on the middle class was done using the Luxembourg Income Study (LIS), an international database containing extensive income as well as socio-demographic information. LIS databases center around particular years, called “waves”. Each wave is around 5 years apart, with Wave #1 beginning in the early 1980s. For my previous research, data was available only up Wave #5 (around 2000), and Wave #5 data was unavailable for some countries. More Wave #5 data is available, and some data for Wave #6, centered around 2004, has come online recently. This provides an opportunity to assess what has happened to inequality and the size of the middle class in the early 2000s. In addition, my earlier work focused only on aggregate tax and spending by governments; it did not look at specific policies and how these promoted a middle class in different nations. This paper focuses on three specific sorts of national spending policy that assist households and affect the size of the middle class across nations and over time. First, there are policies that aid the unemployed and disabled. Second, there are retirement programs that provide income to older households. Third, there are policies that assist families with children (child or family allowances, family leave policies and child support payments). It examines the extent to which each of these policies increased the size of the middle class in the early 2000s, the impact of the set of these three policies on the middle class in the early 2000s, as well as other possible determinants of the size of the middle class in the 2000s.

Suggested Citation

  • Steven Pressman, 2009. "Public Policies and the Middle Class throughout the World in the Mid 2000s," LIS Working papers 517, LIS Cross-National Data Center in Luxembourg.
    • Handle: RePEc:lis:liswps:517
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    References listed on IDEAS

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    1. Timothy Smeeding & Gunther Schmaus & Brigitte Buhmann & Lee Rainwater, 1988. "Equivalence Scales, Well-Being, Inequality and Poverty: Sensitivity Estimates Across Ten Countries Using the LIS Database," LIS Working papers 17, LIS Cross-National Data Center in Luxembourg.
    2. Marcia Meyers & Katherin Ross Phillips & Janet Gornick, 1996. "Supporting the Employment of Mothers: Policy Variation Across Fourteen Welfare States," LIS Working papers 139, LIS Cross-National Data Center in Luxembourg.
    3. Steven Pressman, 1993. "Tax Expenditures for Child Exemptions: A Poor Policy to Aid America’s Children," Journal of Economic Issues, Taylor & Francis Journals, vol. 27(3), pages 699-719, September.
    4. Steven Pressman, 1992. "Child Exemptions or Child Allowances," American Journal of Economics and Sociology, Wiley Blackwell, vol. 51(3), pages 257-272, July.
    5. Christian Weller, 2008. "The Erosion of Middle-Class Economic Security After 2001," Challenge, Taylor & Francis Journals, vol. 51(1), pages 45-68.
    6. Steven Pressman & Robert Scott, 2009. "Consumer Debt and the Measurement of Poverty and Inequality in the US," Review of Social Economy, Taylor & Francis Journals, vol. 67(2), pages 127-148.
    7. Steven Pressman, 2007. "The Decline of the Middle Class: An International Perspective," Journal of Economic Issues, Taylor & Francis Journals, vol. 41(1), pages 181-200, March.
    8. Timothy Smeeding & Gunther Schmaus & Serge Allegreza, 1985. "An Introduction to LIS - The Luxembourg Income Study," LIS Working papers 1, LIS Cross-National Data Center in Luxembourg.
    9. Heather Boushey & Christian Weller, 2008. "Has Growing Inequality Contributed to Rising Household Economic Distress?," Review of Political Economy, Taylor & Francis Journals, vol. 20(1), pages 1-22.
    10. Buhmann, Brigitte, et al, 1988. "Equivalence Scales, Well-Being, Inequality, and Poverty: Sensitivity Estimates across Ten Countries Using the Luxembourg Income Study (LIS) Database," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 34(2), pages 115-142, June.
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    Cited by:

    1. Koen Caminada & Chen Wang, 2011. "Disentangling Income Inequality and the Redistributive Effect of Social Transfers and Taxes in 36 LIS Countries," LIS Working papers 567, LIS Cross-National Data Center in Luxembourg.
    2. Koen Caminada & Kees Goudswaard & Chen Wang & Jinxian Wang, 2019. "Income Inequality and Fiscal Redistribution in 31 Countries After the Crisis," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 61(1), pages 119-148, March.
    3. Ursula Dallinger, 2011. "The Endangered Middle Class? A Comparative Analysis of the Role Public Redistribution Plays," LIS Working papers 565, LIS Cross-National Data Center in Luxembourg.

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