What is Middle Class about the Middle Classes around the World?

• DOI: 10.1257/jep.22.2.3
• Publication Date: 2008-05-05T17:58:05Z
• Authors: Abhijit V Banerjee; Esther Duflo
• Keywords: Budgets; Employment; jel:E21; jel:J61; Education; Eating; jel:J22; Residence Characteristics; 0502 economics and business; Humans; Developing Countries; Poverty; Family Characteristics; Health Services Needs and Demand; Data Collection; 05 social sciences; Commerce; 1. No poverty; Health Care Costs; Emigration and Immigration; consumption; development; investment; middle class; jel:I32; jel:I31; Social Class; jel:O12; 8. Economic growth; jel:O10; Income; Educational Status; Recreation; jel:O15

We expect a lot from the middle classes. At least three distinct arguments about the special economic role of the middle class are traditionally made. In one, new entrepreneurs armed with a capacity and a tolerance for delayed gratification emerge from the middle class and create employment and productivity growth for the rest of society. In a second, perhaps more conventional view, the middle class is primarily a source of vital inputs for the entrepreneurial class: it is their “middle class values”—their emphasis on the accumulation of human capital and savings—that makes them central to the process of capitalist accumulation. The third view, a staple of the business press, emphasizes the middle class consumer, whose demand for quality consumer goods feeds investment in production and marketing, which in turn raises income levels for everyone. This essay asks what we should make of these arguments in the context of today's developing countries. We focus on two groups of households: those whose daily per capita expenditures are between $2 and $4, and those with expenditures between $6 and $10. These are the groups that we will call the middle class. Starting from survey data on patterns of consumption and investment by the middle class in thirteen developing countries, we look for what is distinct about the global middle class, especially when compared to the global poor (defined as those whose per capita daily consumption is below $2 a day). In particular, is there anything special about the way middle class people per spend their money, earn their incomes, or bring up their children?