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Polarization and the Middle Class

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  • Fernando Borraz

    ()
    (Banco Central del Uruguay y Departamento de Economía, Facultad de Ciencias Sociales, Universidad de la República)

  • Nicolás Gonzalez Pampillón

    ()
    (Universidad de Montevideo)

  • Máximo Rossi

    ()
    (Departamento de Economía, Facultad de Ciencias Sociales, Universidad de la República)

Abstract

There is an increasing literature that discusses how to measure the middle class. Some approaches are based on an arbitrary deÖnition such as income quartiles or the poverty line. Recently, Foster and Wolfson developed a methodology which lacks of arbitrariness that enables us to compare the middle class of two di§erent income distributions. We apply this new tool jointly with a complementary method ñrelative distribution approach- to household income data in 1994-2004 and 2004-2010, to analyze the evolution of the middle class and polarization in Uruguay. During the Örst period, which is characterized by an increasing income inequality, we Önd that the middle class declined and income polarization increased. In the second one, where the Uruguayan economy experienced a recovery from the downturn su§ered in 2002, we Önd that the middle class rose and polarization decreased. However, this last result is attenuated when we do not consider the household income imputation because of the new health system implemented in 2008.

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Bibliographic Info

Paper provided by Department of Economics - dECON in its series Documentos de Trabajo (working papers) with number 2011.

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Length: 37 pages
Date of creation: Aug 2011
Date of revision:
Handle: RePEc:ude:wpaper:2011

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Keywords: income polarization; middle class; inequality; social policies; bipolarization;

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  1. Eduardo Lora & Johanna Fajardo, 2013. "Latin American Middle Classes: The Distance Between Perception and Reality," JOURNAL OF LACEA ECONOMIA, LACEA - LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION.
  2. Lopez-Calva, Luis F. & Ortiz-Juarez, Eduardo, 2011. "A vulnerability approach to the definition of the middle class," Policy Research Working Paper Series 5902, The World Bank.
  3. François Bourguignon & Christian Morrisson, 2001. "Inequality among World Citizens : 1820-1992," DELTA Working Papers 2001-18, DELTA (Ecole normale supérieure).
  4. Garcia-Penalosa, Cecilia & Aghion, Philippe & Caroli, Eve, 1999. "Inequality and Economic Growth: The Perspective of the New Growth Theories," Economics Papers from University Paris Dauphine 123456789/10091, Paris Dauphine University.
  5. Easterly, William, 2000. "the middle class consensus and economic development," Policy Research Working Paper Series 2346, The World Bank.
  6. Marina Azzimonti, 2011. "Barriers to Investment in Polarized Societies," American Economic Review, American Economic Association, vol. 101(5), pages 2182-2204, August.
  7. Robert J. Barro, 1999. "Determinants of Democracy," Journal of Political Economy, University of Chicago Press, vol. 107(S6), pages S158-S183, December.
  8. Riccardo Massari & Maria Pittau & Roberto Zelli, 2009. "A dwindling middle class? Italian evidence in the 2000s," Journal of Economic Inequality, Springer, vol. 7(4), pages 333-350, December.
  9. Esther Duflo & Abhijit Banerjee, 2008. "What is Middle Class About the Middle Classes Around the World?," Working Papers id:1363, eSocialSciences.
  10. Joan-Maria Esteban & Debraj Ray, 1991. "On the Measurement of Polarization," Boston University - Institute for Economic Development 18, Boston University, Institute for Economic Development.
  11. Marcelo Bérgolo & Guillermo Cruces, 2011. "Labor Informality and the Incentive Effects of Social Security: Evidence from a Health Reform in Uruguay," IDB Publications 62318, Inter-American Development Bank.
  12. Lykke Andersen, 2001. "Social Mobility in Latin America: Links with Adolescent Schooling," Research Department Publications 3130, Inter-American Development Bank, Research Department.
  13. Leonardo Gasparini & Matias Horenstein & Ezequiel Molina & Sergio Olivieri, 2008. "Income Polarization in Latin America: Patterns and Links with Institutions and Conflict," Oxford Development Studies, Taylor & Francis Journals, vol. 36(4), pages 461-484.
  14. Fernando Borraz & Nicolás González, 2009. "Impact of the Uruguayan Conditional Cash Transfer Program," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 46(134), pages 243-271.
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Cited by:
  1. Fabio Clementi & Francesco Schettino, 2013. "Income polarization in Brazil, 2001-2011: A distributional analysis using PNAD data," Economics Bulletin, AccessEcon, vol. 33(3), pages 1796-1815.

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