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Do middle classes bring institutional reforms ?, Volume 1
Author:Loayza, Norman; Rigolini, Jamele; Llorente, Gonzalo; Country:World;
Date Stored:2012/03/26Document Date:2012/03/01
Document Type:Policy Research Working PaperSubTopics:Inequality; Governance Indicators; Economic Theory & Research; Poverty Impact Evaluation; Achieving Shared Growth
Language:EnglishMajor Sector:Public Administration
Rel. Proj ID:1W-Reforms And Growth-659170 -- -- P080834;Region:The World Region
Report Number:WPS6015Sub Sectors:Central Government (Central Agencies)
Collection Title:Policy Research working paper ; no. WPS 6015Paper is funded by the Knowledge for Change Program (KCP)TF No/Name:TF098053-KCPII - Industrial Policy in an Uncertain Environment; TF099120-KCP; TF099853-PHRD STAFF GRANT SUPPORT FOR TOMOKO WADA
Volume No:1  

Summary: 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.

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