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The middle class consensus and economic development

By William Easterly


A middle class consensus distinguishes development successes from failures. A middle class consensus is defined as a high share of income for the middle class and a low degree of ethnic polarization. The paper links the existence of a middle class consensus to exogenous country characteristics like resource endowments, along the lines of the provocative thesis of Engerman and Sokoloff 1997 that tropical commodity exporters are more unequal than other societies. This hypothesis is confirmed with cross-country data. A theoretical model shows how groups – distinguished by class or ethnicity-- will under-invest in human capital and infrastructure when there is a “leakage ” to another group. Using resource endowments as instruments for inequality, a higher share of income for the middle class and lower ethnic polarization are empirically associated with higher income, higher growth, more education, better health, better infrastructure, better economic policies, less political instability, and more democracy

Year: 1999
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