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Does Growing Inequality Harm the Middle Class?

  • Robert Frank


    (Johnson Graduate School of Management, Cornell University)

Respected economists invoke the Pareto criterion to argue that inequality doesn't really matter so long as no one ends up with less in absolute terms. Using income levels to measure the well-being of individual families, these economists argue that since the rich now have much more money than before and the middle class doesn't have less, society as a whole must be better off. Yet "having more income" and "being better off" do not have exactly the same meaning. I argue that changes in spending patterns prompted by recent changes in the distributions of income and wealth have imposed not only important psychological costs on middle-income families, but also a variety of more tangible economic costs.

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Article provided by Eastern Economic Association in its journal Eastern Economic Journal.

Volume (Year): 26 (2000)
Issue (Month): 3 (Summer)
Pages: 253-264

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Handle: RePEc:eej:eeconj:v:26:y:2000:i:3:p:253-264
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