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Do middle classes bring institutional reforms ?

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  • Loayza, Norman
  • Rigolini, Jamele
  • Llorente, Gonzalo

Abstract

The paper examines the link between poverty, the middle class and institutional outcomes using a new cross-country panel dataset on the distribution of income and expenditure. It uses an econometric methodology to gauge whether a larger middle class has a causal effect on policy and institutional outcomes in three areas: social policy in health and education, market-oriented economic structure and quality of governance. The analysis find that when the middle class becomes larger (measured as the proportion of people earning more than US$10 a day), social policy on health and education becomes more progressive, and the quality of governance (democratic participation and official corruption) also improves. This trend does not occur at the expense of economic freedom, as a larger middle class also leads to more market-oriented economic policy on trade and finance. These beneficial effects of a larger middle class appear to be more robust than the impact of lower poverty, lower inequality or higher gross domestic product per capita. That may be linked to the evolution of the middle class: they are more enlightened, more likely to take political actions and have a stronger voice. They also share preferences and values for policy and institutional reforms, as well as higher stakes in property rights and wealth accumulation.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 6015.

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Date of creation: 01 Mar 2012
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Handle: RePEc:wbk:wbrwps:6015

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Keywords: Inequality; Governance Indicators; Economic Theory&Research; Poverty Impact Evaluation; Achieving Shared Growth;

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References

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  1. Rodrik, Dani & Alesina, Alberto, 1994. "Distributive Politics and Economic Growth," Scholarly Articles 4551798, Harvard University Department of Economics.
  2. Chang, Roberto & Kaltani, Linda & Loayza, Norman, 2005. "Openness can be good for growth : the role of policy complementarities," Policy Research Working Paper Series 3763, The World Bank.
  3. Foellmi, Reto & Zweimüller, Josef, 2005. "Income Distribution and Demand-Induced Innovations," CEPR Discussion Papers 4985, C.E.P.R. Discussion Papers.
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  8. Foellmi, Reto & Oechslin, Manuel, 2008. "Why progressive redistribution can hurt the poor," Journal of Public Economics, Elsevier, vol. 92(3-4), pages 738-747, April.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Do Middle Classes Bring Institutional Reforms?
    by Maximo Rossi in Wikiprogress América Latina on 2012-04-19 19:24:00
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Cited by:
  1. Andy Sumner, 2012. "The Buoyant Billions: How “Middle Class” Are the New Middle Classes in Developing Countries? (And Why Does It Matter?)," Working Papers 309, Center for Global Development.
  2. Huynh, Phu & Kapsos, Steven, 2013. "Economic class and labour market inclusion poor and middle class workers in developing Asia and the Pacific," ILO Working Papers 482296, International Labour Organization.
  3. Céline BONNEFOND & Matthieu CLEMENT & François COMBARNOUS, 2013. "In search of the elusive Chinese urban middle class: An exploratory analysis," Cahiers du GREThA 2013-19, Groupe de Recherche en Economie Théorique et Appliquée.
  4. Andy Sumner, 2012. "Where Will the World’s Poor Live? An Update on Global Poverty and the New Bottom Billion," Working Papers 305, Center for Global Development.
  5. Francisco H.G. Ferreira & Julian Messina & Jamele Rigolini & Luis-Felipe López-Calva & Maria Ana Lugo & Renos Vakis, 2013. "Economic Mobility and the Rise of the Latin American Middle Class," World Bank Publications, The World Bank, number 11858, January.
  6. Ncube, Mthuli & Shimeles, Abebe, 2013. "The Making of Middle Class in Africa: Evidence from DHS Data," IZA Discussion Papers 7352, Institute for the Study of Labor (IZA).

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