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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.

Suggested Citation

  • Loayza, Norman & Rigolini, Jamele & Llorente, Gonzalo, 2012. "Do middle classes bring institutional reforms ?," Policy Research Working Paper Series 6015, The World Bank.
  • Handle: RePEc:wbk:wbrwps:6015
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    References listed on IDEAS

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    Cited by:

    1. repec:bla:rdevec:v:21:y:2017:i:2:p:404-424 is not listed on IDEAS
    2. Céline Bonnefond & Matthieu Clément & François Combarnous, 2015. "In search of the elusive Chinese urban middle class: an exploratory analysis," Post-Communist Economies, Taylor & Francis Journals, vol. 27(1), pages 41-59, March.
    3. Tim Krieger & Daniel Meierrieks, 2016. "Does Income Inequality Lead to Terrorism?," CESifo Working Paper Series 5821, CESifo Group Munich.
    4. repec:ilo:ilowps:482296 is not listed on IDEAS
    5. repec:bla:revinw:v:63:y:2017:i:4:p:633-660 is not listed on IDEAS
    6. Krieger, Tim & Meierrieks, Daniel, 2016. "Political capitalism: The interaction between income inequality, economic freedom and democracy," European Journal of Political Economy, Elsevier, vol. 45(C), pages 115-132.
    7. Rick Mourits & Luuk Van Kempen, 2016. "How Do the Middle Class and the Poor Grow Apart? An Empirical Test of the Psychological Well-Being Pathway in Middle-Income Countries," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 28(5), pages 893-915, November.
    8. 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.
    9. 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, June.
    10. 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).
    11. Tony Addison & Yukka Pirttilä & Finn Tarp & Hai-Anh H. Dang & Peter F. Lanjouw, 2017. "Welfare Dynamics Measurement: Two Definitions of a Vulnerability Line and Their Empirical Application," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 63(4), pages 633-660, December.
    12. Gómez León, María, 2015. "The rise of the middle class : Brazil (1839-1950)," IFCS - Working Papers in Economic History.WH wp15-09, Universidad Carlos III de Madrid. Instituto Figuerola.
    13. repec:taf:rsocec:v:75:y:2017:i:1:p:26-48 is not listed on IDEAS
    14. Nancy Birdsall, 2015. "Does the Rise of Middle Class Lock in Good Government in the Developing World?," Working Papers id:7861, eSocialSciences.
    15. 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.

    More about this item

    Keywords

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

    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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