Do Middle Classes Bring Institutional Reforms?

15 Pages Posted: 31 Mar 2012

See all articles by Norman Loayza

Norman Loayza

World Bank - Research Department

Jamele Rigolini

New York University (NYU) - Department of Economics

Gonzalo Llorente

affiliation not provided to SSRN

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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.

Keywords: poverty, middle class, income, institutions, development

JEL Classification: D3, H5, O1, O4

Suggested Citation

Loayza, Norman and Rigolini, Jamele and Llorente, Gonzalo, Do Middle Classes Bring Institutional Reforms?. IZA Discussion Paper No. 6430. Available at SSRN: https://ssrn.com/abstract=2031998

Norman Loayza (Contact Author)

World Bank - Research Department ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

Jamele Rigolini

New York University (NYU) - Department of Economics ( email )

269 Mercer Street, 7th Floor
New York, NY 10011
United States

Gonzalo Llorente

affiliation not provided to SSRN

No Address Available

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