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Do Economic Recessions ‘Squeeze the Middle-Class’?

Author

Listed:
  • Alberto Batinti
  • Joan Costa-i-Font

Abstract

We examine whether economic downturns reshape the distribution of population income giving rise to a “middle-class squeeze.” We test this hypothesis using alternative definitions of middle-class, such as income-based measures from the Luxembourg Income Study (LIS), and perceived measures from the Integrated Values Study (IVS). Our findings suggest that, although recessions do not produce a middle-class squeeze overall, the unanticipated shocks resulting from the Great Recession did. Furthermore, we find that recessions increase the share of the population that regards itself as ‘middle-class.’ Estimates are heterogeneous to the baseline unemployment at the time of a recession, country spending on social protection, to middle-class measures and definitions.

Suggested Citation

  • Alberto Batinti & Joan Costa-i-Font, 2017. "Do Economic Recessions ‘Squeeze the Middle-Class’?," CESifo Working Paper Series 6673, CESifo.
  • Handle: RePEc:ces:ceswps:_6673
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    File URL: https://www.cesifo.org/DocDL/cesifo1_wp6673.pdf
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    References listed on IDEAS

    as
    1. 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
      [La movilidad económica y el crecimiento de la clase media en América Latina]
      ," World Bank Publications, The World Bank, number 11858.
    2. Robert J. Barro, 1999. "Determinants of Democracy," Journal of Political Economy, University of Chicago Press, vol. 107(S6), pages 158-183, December.
    3. Luis López-Calva & Eduardo Ortiz-Juarez, 2014. "A vulnerability approach to the definition of the middle class," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 12(1), pages 23-47, March.
    4. Easterly, William, 2001. "The Middle Class Consensus and Economic Development," Journal of Economic Growth, Springer, vol. 6(4), pages 317-335, December.
    5. Matthias Doepke & Fabrizio Zilibotti, 2005. "Social Class and the Spirit of Capitalism," Journal of the European Economic Association, MIT Press, vol. 3(2-3), pages 516-524, 04/05.
    6. Abhijit V. Banerjee & Esther Duflo, 2008. "What Is Middle Class about the Middle Classes around the World?," Journal of Economic Perspectives, American Economic Association, vol. 22(2), pages 3-28, Spring.
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Do Economic Recessions Squeeze the Middle-Class?
      by maximorossi in NEP-LTV blog on 2018-02-27 12:22:51

    More about this item

    Keywords

    middle-class; Great Recession; LIS & IVS data; employment shocks; income distribution; social insurance;

    JEL classification:

    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • I30 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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