Working Paper: CEPR ID: DP6613
Authors: Abhijit Banerjee; Esther Duflo
Abstract: This paper uses household surveys from 13 developing countries to describe consumption choices, health and education investments, employment patterns and other features of the of the economic lives of the ?middle classes? defined as those whose daily consumption per capita is between $2 and $4 or between $6 and $10. The data shed lights on differences and similarities between the middle classes and the poor and helps discriminating between various theories of the role of the middle classes in the development process. We find that the average middle class person is not an entrepreneur in waiting: while he or she might run a business, this is usually a small, not very profitable business. The single most important characteristic of the middle class seems to be that they are more likely to be holding a steady job. Perhaps as a result, they also have fewer, healthier, and better educated children. While there are clear differences in consumption patterns between the poor and the middle classes, there are also very strong resemblance within countries, and contrasts across countries, which might either reflect the importance of relative prices in shaping consumption decisions or the power of norms/fashions in determining consumption.
Keywords: consumption; development; investment; middle class
JEL Codes: I32; O10; O12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| steady employment (J63) | healthier children (I19) |
| steady employment (J63) | better-educated children (I24) |
| income increases (D31) | share of budget spent on food (H61) |
| income increases (D31) | expenditure on entertainment (L82) |
| income increases (D31) | expenditure on education (H52) |
| relative prices and norms (P22) | consumption decisions (D12) |