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Do Middle Classes Bring Institutional Reforms?

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  • Loayza, Norman

    (World Bank)

  • Rigolini, Jamele

    (World Bank)

  • Llorente, Gonzalo

    (World Bank)

Abstract

We revisit the link between poverty, the middle class and institutional outcomes using a newly developed cross-country panel dataset containing detailed information on the distribution of income and expenditures. When the size of the middle class increases (measured as the proportion of people with income above 10 US Dollars a day in PPP terms), social policy on health and education becomes more active and the quality of governance regarding democratic participation and official corruption improves. This does not occur at the expense of economic freedom, as an expansion of the middle class also implies more market-oriented economic policy on trade and finance. The impact of a larger middle class appears to be more robust than those of lower poverty, lower inequality, or higher GDP per capita.

Suggested Citation

  • Loayza, Norman & Rigolini, Jamele & Llorente, Gonzalo, 2012. "Do Middle Classes Bring Institutional Reforms?," IZA Discussion Papers 6430, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp6430
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    More about this item

    Keywords

    poverty; middle class; income; institutions; development;
    All these keywords.

    JEL classification:

    • D3 - Microeconomics - - Distribution
    • H5 - Public Economics - - National Government Expenditures and Related Policies
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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