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The Role of Middle Class in Economic Development: What Do Cross-Country Data Show?

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  • Natalie Chun
  • Rana Hasan
  • Muhammad Habibur Rahman
  • Mehmet Ali Ulubaşoğlu

Abstract

This paper investigates the channels through which the middle class may matter for consumption growth and development, as well as the determinants of size and growth of the middle class. Using different middle class measures and a panel of 72 developing countries spanning the period 1985–2006, the authors find that a larger middle class influences growth primarily through higher levels of human capital investment. While institutional and cultural characteristics may present barriers to fostering the middle class, enlarging governments, developing urban areas, promoting democracy, and limiting ethnic concentration are all potentially conducive to boosting the size of the middle class.
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  • Natalie Chun & Rana Hasan & Muhammad Habibur Rahman & Mehmet Ali Ulubaşoğlu, 2017. "The Role of Middle Class in Economic Development: What Do Cross-Country Data Show?," Review of Development Economics, Wiley Blackwell, vol. 21(2), pages 404-424, May.
    • Handle: RePEc:bla:rdevec:v:21:y:2017:i:2:p:404-424
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    3. Grohmann, Antonia, 2018. "Financial literacy and financial behavior: Evidence from the emerging Asian middle class," Pacific-Basin Finance Journal, Elsevier, vol. 48(C), pages 129-143.
    4. Orlando Zambrano Roman, 2020. "An emerging but vulnerable middle class: a description of trends in Asia and the Pacific," Asia-Pacific Sustainable Development Journal, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP), vol. 27(1), pages 1-20, June.
    5. Reham Rizk & Ricardo Nogales, 2017. "Revisiting the Middle-Class Myth: Evidence From A Cross-Country Analysis of African Social Progress," Working Papers 1139, Economic Research Forum, revised 09 2003.
    6. Mohammad Reza Farzanegan & Nader Habibi, 2024. "The Effect of International Sanctions on the Size of the Middle Class in Iran," CESifo Working Paper Series 11175, CESifo.
    7. Vasiliy A. Anikin & Yulia P. Lezhnina & Svetlana V. Mareeva & Ekaterina D. Slobodenyuk & Nataliya N. Tikhonovà, 2016. "Income Stratification: Key Approaches and Their Application to Russia," HSE Working papers WP BRP 02/PSP/2016, National Research University Higher School of Economics.
    8. Tsiry Andrianampiarivo, 2017. "Moderate prosperity, an adaptation of the middle class concept to a Malagasy rural area: the case of Itasy," Review of Social Economy, Taylor & Francis Journals, vol. 75(1), pages 26-48, January.
    9. Tsiry ANDRIANAMPIARIVO, 2014. "Moderate Prosperity, an adaptation of the Middle Class concept to a Malagasy rural area: the case of Itasy," Cahiers du GREThA (2007-2019) 2014-20, Groupe de Recherche en Economie Théorique et Appliquée (GREThA).
    10. Karina Alfaro‐Moreno & José Javier Núñez‐Velázquez & Luisa Fernanda Bernat‐Diaz, 2019. "How does wage polarization affect productivity? The case of Spanish regions," Papers in Regional Science, Wiley Blackwell, vol. 98(3), pages 1317-1333, June.
    11. Menyeh, Bridget Okyerebea, 2021. "Financing electricity access in Africa: A choice experiment study of household investor preferences for renewable energy investments in Ghana," Renewable and Sustainable Energy Reviews, Elsevier, vol. 146(C).
    12. 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.
    13. Max Kohler & Stefan Sperlich & Jisu Yoon, 2019. "A Varying Coefficient Model for Assessing the Returns to Growth to Account for Poverty and Inequality," Papers 1903.02390, arXiv.org.
    14. Diego F. Grijalva, 2017. "The rise of the middle class in Ecuador during the oil boom," Revista Cuadernos de Economia, Universidad Nacional de Colombia, FCE, CID, vol. 36(72), October.
    15. SAM, Vichet, 2018. "Overeducation among graduates in developing countries: What impact on economic growth?," MPRA Paper 87674, University Library of Munich, Germany.

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    More about this item

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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