1. Banerjee and Duflo (2008); Ravallion (2009); Kharas (2010); Birdsall (2010).
  2. Kharas (2010) estimates that more than half of the world’s middle class, using his definition – households with daily incomes between 10 and 100 USD adjusted for purchasing-power parity – will be Asian by 2020, much of it concentrated in China and India.
  3. Easterly (2001). He defines the middle class as those in the second, third and fourth income quintiles; countries where this group earns a larger share of national income are said to have a more robust middle class. This paper is one of a much larger group of empirical studies on the negative effects of inequality on growth, in the sense that the size of the middle class is inversely proportional to the level of income inequality in an economy. Bénabou (1996, 2005) reviews much of this enormous literature.
  4. Johnson (1958). Reaction to Johnson’s optimistic thesis tended to grant the middle classes a progressive role in confronting oligarchies in the early part of the 20th century, but claimed that thereafter they aligned themselves with elites and, post-1964, with military dictatorships; see Pike (1963) and Hoselitz (1962). The various schools of thought related to the historical role of the middle class are reviewed and situated in a Latin American context by Adamovsky (2009) for Argentina, Barr-Melej (2001) for Chile, Owensby (1999) for Brazil and Parker (1998) for Peru.
  5. Per capita household income is “equivalised” in such measures to allow comparison of households of different sizes and structures. For the statistics reported in this Outlook¸ weightings for equivalised or household-size adjusted income are as follows: a weight of 1 is assigned to the income of the household head, a weight of 0.5 for each additional adult, and a weight of 0.3 for each minor aged 14 or younger. This is the “OECD-modified scale”, which has been adopted by the European Commission, among others. Other scales used in international comparisons include the square root of household size (used in many OECD studies since the 1990s). In practice, the difference implied by the choice of one or another of these weighting schemes is small. See Castellani and Parent (2010) for more details.
  6. Ravallion (2009); Banerjee and Duflo (2008). Both papers refer to the “middle class” rather than the “middle sector”; for reasons that will be explained later in this chapter, we prefer to call this group the “middle sectors” and not the “middle class”.
  7. Our definition is very much in the spirit of MIT economist Lester Thurow’s (1987) classic definition of the middle sectors in the United States as the group with incomes lying between 75% and 125% of the median income.
  8. OECD (2008). To assess the robustness of the study’s results, the authors compared poverty lines at 40%, 50% and 60% of median household income. See also Chauvel (2006). This kind of relative poverty line is not as frequently used in analysis of low-income developing countries, though Birdsall et al. (2000) is an important exception.
  9. A more thoroughgoing exploration of the empirical and conceptual issues surrounding relative and internationally comparable measures of the middle sectors is provided by Brandolini (2010).
  10. These 10 countries account for 82.2% of the population of the 20 Latin American countries in 2006, according to ECLAC (2010), and 80.3% of the population of all 46 Latin American and Caribbean countries and territories. For the ten Latin American countries in Figure 1.1 the total number of middle-sector people in 2006 was just under 214 million. Allowing for population growth and assuming that the average proportion of middle-sector households is the same in the countries not included in this figure, a back-of-the-envelope calculation suggests that the size of the middle sectors in Latin America and the Caribbean in 2011 is 275 million. Given that we adopt a relative definition of middle sectors, with different income thresholds in every country, however, adding up the middle sectors across countries in this way may be akin to comparing apples and oranges.
  11. OECD (2008, Chapter 2).
  12. Table 1.A2 in the statistical annex extends this across the disadvantaged, middle sectors and affluent.
  13. Our measure of government employees based on the occupational category “public administration, education, health” in household surveys is inexact for at least two reasons. First, that category may include private-sector health and education workers, so that this proportion tends to overstate the size of public-sector employment. Second, people who work in public-sector enterprises in manufacturing, transport or communication might accordingly be counted in those sectors and not in public administration, so that the latter category tends to understate the extent of public-sector employment.
  14. See Acs (2006) for a discussion of “opportunity entrepreneurship” – “an active choice to start a new enterprise based on the perception that an unexploited or underexploited business opportunity exists.” This is contrasted with “necessity entrepreneurship,” common in developing countries but with fewer positive externalities for economic development. On the links between entrepreneurship, job creation and the knowledge-based economy, see Audretsch and Thurik (2001), Audretsch (2002), and Agarwal et al. (2008). On entrepreneurship and economic growth see Audretsch (1995), Hopenhayn (1992) and Klepper (1996).
  15. For instance, in Uruguay, Peru, Panama, Dominican Republic, Bolivia, Brazil and Mexico more than 60% of total assets are held by the three largest commercial banks. See Beck et al. (2000, updated November 2008) and Micco and Panizza (2005).
  16. For other countries, similar results are obtained from household surveys related to other aspects of the financial sector. For instance, in Colombia, more than 90% of the population does not have access to credit cards, and of that group close to 80% belong to middle and disadvantaged sectors.
  17. OECD (2010).
  18. This paragraph summarises Marcel (2009), whose analysis of Chilean data is based on the CASEN surveys. Torche and López Calva (2010), meanwhile, use panel-survey data to analyse intra-generational mobility of the middle sectors in Chile and Mexico.
  19. Torche (2009) summarises the available estimates of inter-generational mobility based on retrospective survey data in Latin America.
  20. The complete class of poverty-gap indices is developed in Foster et al. (1984).
  21. On Marx, see Elster (1986); Weber (1958) and Erikson and Goldthorpe (1992). See Chauvel (2006, Chapter 1) for more discussion on the relationship between median income and middle class from a sociological standpoint.
  22. “When the limitation of consumption is combined with this release of acquisitive activity, the inevitable practical result is obvious: accumulation of capital through ascetic compulsion to save” Weber (1905, Chapter 5). See Acemoglu and Zilibotti (1997), Doepke and Zilibotti (2005, 2008), for economic analyses of these arguments. Banerjee and Duflo (2008), meanwhile, are as sceptical as we are about the evidence for above-average rates of entrepreneurship in the middle classes of developing economies, using an income-based definition of the middle class.
  23. This text box was written by Eduardo Lora, based on Fajardo and Lora (2010).
  24. Eisenhauer (2008) summarises different surveys from the United States, according to which the self-identified middle class ranges from 50% to 80% of the population.
  25. This is the subject of Parker’s (1998) fascinating history of the Peruvian middle class.
  26. Figure 1.10 has been elaborated with data for the eight countries for which Country Notes are prepared for this Outlook: the eight Latin American and Caribbean countries that are members of the OECD Development Centre’s Governing Board. These countries tend to have higher income per head than the region as a whole. Many of the countries not included in Figure 1.10 would likely exhibit a relationship between the extreme poverty line and 50% of median income more like that exhibited by Mexico and the Dominican Republic in the figure.


  • Acemoglu, D. and F. Zilibotti (1997), "Was Prometheus Unbound by Chance? Risk, Diversification, and Growth", Journal of Political Economy, Vol. 105(4), pp. 709-51, August.
  • Acs, Z. (2006), "How Is Entrepreneurship Good for Economic Growth”, Innovations Journal, Winter.
  • Adamovsky, E. (2009), Historia de la clase media argentina. Apogeo y decadencia de una ilusión, 1919-2003, Planeta, Buenos Aires.
  • Agarwal, R., D. Audretsch and M.B. Sarkar (2008), "The Process of Creative Construction: Knowledge Spillovers, Entrepreneurship and Economic Growth”, Jena Economic Research Papers 2008 - 008.
  • Audretsch, D. (1995), Innovation and Industry Evolution, MIT Press, Cambridge, MA.
  • Audretsch, D. (2002), Entrepreneurship: A Survey of the Literature, prepared for the European Commission (Enterprise Directorate General), Institute for Development Strategies, Indiana University and the Centre for Economic Policy Research (CEPR), London.
  • Audretsch, D. and R. Thurik (2001), “What’s New about the New Economy? Sources of Growth in the Managed and Entrepreneurial Economies”, Industrial and Corporate Change, 10(1), 267-315.
  • Banerjee, A. and E. Duflo (2008), "What is Middle Class about the Middle Classes around the World?”, Journal of Economic Perspectives, Vol. 22, No. 2, Spring 2008, pp. 3–28.
  • Barr-Melej, P. (2001), Reforming Chile. Cultural Politics, Nationalism and the Rise of the Middle Class, University of North Carolina Press, Chapel Hill and London.
  • Beck, T., A. Demirgüç-Kunt and R. Levine (2000), "A New Database on Financial Development and Structure”, World Bank Economic Review 14, pp. 597-605, updated November 2008.
  • Bénabou, R. (1996), “Inequality and Growth”, NBER Macroeconomics Annual 1996, Vol. 11, pp. 11-92.
  • Bénabou, R. (2005), "Inequality, Technology and the Social Contract”, in S. Durlauf and P. Aghion (eds.), Handbook of Economic Growth, Vol. 1A, North-Holland, Elsevier.
  • Birdsall, N., C. Graham and S. Pettinato (2000), “Stuck in the Tunnel: Is Globalisation Muddling the Middle Class?”, Center on Social and Economic Dynamics Working Paper 14, Brookings Institution, Washington, DC.
  • BIRDSALL, N. (2010), “The (Indispensable) Middle Class in Developing Countries; or The Rich and the Rest, Not the Poor and the Rest”, Working Paper 207, Center for Global Development, Washington, DC.
  •  Brandolini, A. (2010), “On the Identification of the ‘Middle-Class’”, conference paper presented at Inequality and the Status of the Middle Class: Lessons from the Luxembourg Income Study, Luxembourg, June. Online at
  • Castellani, F. and G. Parent (2010), Being Middle Class in Latin America, mimeo, OECD Development Centre, Paris.
  • Chauvel,  L., (2006), Les classes moyennes à la derive, Seuil/La République des Idées, Paris.
  • Doepke, M. and F. Zilibotti (2005), “Social Class and the Spirit of Capitalism”, Journal of the European Economic Association Vol. 3(2-3), pp. 516–24.
  • Doepke, M. and F. Zilibotti (2008), "Occupational Choice and the Spirit of Capitalism”, Quarterly Journal of Economics, Vol. 123(2), pp. 747-93.
  • Easterly, W. (2001), “The middle class consensus and economic development”, Journal of Economic Growth, Vol. 6(4), pp. 317-35.
  • ECLAC (2010), Anuario Estadístico de America Latina y el Caribe, United Nations Economic Commission for Latin America and the Caribbean, Santiago de Chile.
  • Eisenhauer, J.G. (2008), "An Economic Definition of the Middle Class”, Forum for Social Economics, Vol. 37, No. 2, pp. 103-113.
  • Elster, J. (1986), An Introduction to Karl Marx, Cambridge University Press, Cambridge, UK.
  • Erikson, R. and J.H. Goldthorpe (1992), The Constant Flux: A Study of Class Mobility in Industrial Societies, Clarendon Press, Oxford.
  • Fajardo, J. and E. Lora (2010), Understanding the Latin American Middle Classes: Reality and Perception, Inter-American Development Bank, Research Department, June.
  • Foster, J., J. Greer and E. Thorbecke (1984), "A Class of Decomposable Poverty Measures”, Econometrica, Vol. 52, No. 3, pp. 761-66.
  • Hopenhayn, H.A. (1992), “Entry, Exit and Firm Dynamics in Long Run Equilibrium”, Econometrica, Vol. 60, pp. 1127-50.
  • Hoselitz, B.F. (1962), "El desarrollo económico en América Latina”, Desarrollo Económico, No. 2, October, pp. 49-65.
  • Johnson, J.J. (1958), Political Change in Latin America. The Emergence of the Middle Sectors, Stanford University Press, Stanford, CA.
  • Kharas, H., (2010), The Emerging Middle Class in Developing Countries, OECD Development Centre Working Paper No. 285, Paris.
  • Klepper, S. (1996), “Entry, Exit, Growth, and Innovation over the Product Life Cycle”, American Economic Review, 86(3), pp. 562-583.
  • Latinobarómetro. Online at
  • Marcel, M. (2009), Movilidad, desigualdad y política social en América Latina, mimeo, Inter-American Development Bank, Washington, DC.
  • Micco, A. and U. Panizza (2005), “Bank Concentration and Credit Volatility”, Central Bank of Chile Working Papers 342, Santiago de Chile.
  • Murphy, K., A. Schleifer and R. Vishny (1989), “Industrialisation and the Big Push.” Journal of Political Economy, 97(5), pp. 1003–26.
  • OECD (2008), Growing Unequal? Income Distribution and Poverty in OECD Countries, OECD, Paris.
  • OECD (2010), “Family Affair: Intergenerational Social Mobility across OECD Countries”, in Economic Policy Reforms: Going for Growth. OECD, Paris.
  • Owensby, B.P. (1999), Intimate Ironies. Modernity and the Making of Middle-Class Lives in Brazil, Stanford University Press, Stanford, CA.
  • Parker, D.S. (1998), The Idea of the Middle Class. White-Collar Workers and Peruvian Society, 1900-1950, Pennsylvania State University Press, University Park, PA.
  • Pike, F.B. (1963), “Aspects of Class Relations in Chile, 1850-1960”, Hispanic American Historical Review, Vol. 43, pp. 14-33.
  • Ravallion, M. (2009), "The Developing World's Bulging (but Vulnerable) Middle Class”, World Development, Vol. 38, No. 4, pp. 445-454.
  • Thurow, L. (1987), “A Surge in Inequality”, Scientific American, 256, pp. 30-37.
  • Torche, F. (2009), "Sociological and Economic Approaches to the Intergenerational Transmission of Inequality in Latin America”, Research for Public Policy, Human Development, HD-09-2009, RBLAC-UNDP, New York, NY.
  • Torche, F. and L.F. López Calva (2010), “Stability and Vulnerability of the Latin American Middle Class”, unpub. ms., New York University and United Nations Development Programme.
  • Weber, M. (1905), Die protestantische Ethik und der 'Geist' des Kapitalismus, English translation by T. Parsons, 1930, The Protestant Ethic and the Spirit of Capitalism, Unwin Hyman, London and Boston.
  • Weber, M. (1958), "Class, Status and Party", in H. Gerth, and C.W. Mills (eds.), From Max Weber: Essays in Sociology, Oxford University Press, Oxford.