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A vulnerability approach to the definition of the middle class

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  • Lopez-Calva, Luis F.
  • Ortiz-Juarez, Eduardo

Abstract

Measurement of the middle class has recently come to the center of policy debate in middle-income countries as they search for the potential engines of growth and good governance. This debate assumes, first, that there is a meaningful definition of class, and second, that thresholds that define relatively homogeneous groups in terms of pre-determined sociological characteristics can be found empirically. This paper aims at proposing a view of the middle class based on vulnerability to poverty. Following this approach the paper exploits panel data to determine the amount of comparable income -- associated with a low probability of falling into poverty -- which could define the lower bound of the middle class. The paper looks at absolute thresholds, challenging the view that people above the poverty line are actually part of the middle class. The estimated lower threshold is used in cross-section surveys to quantify the size and the evolution of middle classes in Chile, Mexico, and Peru over the past two decades. The first relevant feature relates to the fact that the proposed thresholds lie around the 60th percentile of the distribution. The evidence also shows that the middle class has increased significantly in all three countries, suggesting that a higher number of households face lower probabilities of falling into poverty than they did in the 1990s. There is an important group of people, however, which cannot be defined as middle class from this perspective, but are not eligible for poverty programs according to traditional definitions of poverty.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 5902.

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Date of creation: 01 Dec 2011
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Handle: RePEc:wbk:wbrwps:5902

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Keywords: Rural Poverty Reduction; Inequality; Regional Economic Development; Urban Partnerships&Poverty; Services&Transfers to Poor;

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  1. Anthony B. Atkinson & Andrea Brandolini, 2011. "On the identification of the “middle class”," Working Papers 217, ECINEQ, Society for the Study of Economic Inequality.
  2. Dercon, Stefan, 2002. "Income Risk, Coping Strategies and Safety Nets," Working Paper Series, World Institute for Development Economic Research (UNU-WIDER) UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  3. Hoddinott, John & Quisumbing, Agnes, 2003. "Methods for microeconometric risk and vulnerability assessments," Social Protection Discussion Papers 29138, The World Bank.
  4. Sen, Amartya, 1983. "Poor, Relatively Speaking," Oxford Economic Papers, Oxford University Press, vol. 35(2), pages 153-69, July.
  5. James Foster & Michael Wolfson, 2010. "Polarization and the decline of the middle class: Canada and the U.S," Journal of Economic Inequality, Springer, Springer, vol. 8(2), pages 247-273, June.
  6. Easterly, William, 2001. " The Middle Class Consensus and Economic Development," Journal of Economic Growth, Springer, Springer, vol. 6(4), pages 317-35, December.
  7. John H Goldthorpe & Abigail McKnight, 2004. "The Economic Basis of Social Class," CASE Papers, Centre for Analysis of Social Exclusion, LSE 080, Centre for Analysis of Social Exclusion, LSE.
  8. Ligon, Ethan & Schechter, Laura, 2004. "Evaluating different approaches to estimating vulnerability," Social Protection Discussion Papers 30159, The World Bank.
  9. Abhijit V. Banerjee & Esther Duflo, 2008. "What Is Middle Class about the Middle Classes around the World?," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 22(2), pages 3-28, Spring.
  10. John H. Goldthorpe & Abigail McKnight, 2004. "The economic basis of social class," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 6312, London School of Economics and Political Science, LSE Library.
  11. Ravallion, Martin, 2009. "The Developing World's Bulging (but Vulnerable) "Middle Class"," Policy Research Working Paper Series 4816, The World Bank.
  12. Gaiha, Raghav & Imai, Katsushi, 2008. "Measuring Vulnerability and Poverty: Estimates for Rural India," Working Paper Series, World Institute for Development Economic Research (UNU-WIDER) RP2008/40, World Institute for Development Economic Research (UNU-WIDER).
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