Role of Middle Class in Economic Development

Chun, Natalie. Asian Development Bank 2011

Key Role of Middle Class Higher Growth

Growth Experiences of Brazil & Republic of Korea; 3 Points: 1. Middle Class is the class of Entrepreneurs which foster innovation & growth; 2. Middle class values encourage accumulation of savings and Human capital; 3. Consumption power of middle class leads to diversification & expansion of

Analysis of Middle Class

Concept of importance of Middle class Not only for consumption power; Its Ability to form Political or Economic Action Group that demands and implements policies that can contribute to market-oriented growth.

Focus on Developing Countries

1. Definition of middle class varies; 2. Growth path and factors differ substantially. Key Finding: Middle class has role in driving consumption growth and role in human cpital accumulation; Key Finding: Positive and significant relationship between size of the middle class and economic growth thru higher levels of Schooling;

Analysis: Key Points

Middle Class is Positively associated with Higher Levels of Urbanization & Better Democracy; Size of Government in an Economy is Positively related to the Size of the middle class; However, growth in the govts size hurts the growth of the middle class. Growth in the size of the private sector helps the growth of the middle class; French and German legal traditions compared to the British system are negatively related to the size and growth of the middle class.

Significant Findings:
Policies that factor in the welfare of the middle class and nurture their growth a more effective long-term strategy for alleviating poverty compared to policies solely focused on the poor. Growth in the middle class is sustainable given the diverse racial and ethnic groups participating in the process of growth.

Significant Findings:
Politically & Economically strong Middle class- is likely to hold a Government accountable, ensuring the rule of law, protection of property & continued economic reform. Key strength of this Paper: Cross-country data and channels through which middle class affects and impacts economic development and determinants of size and growth.