Polarization and the Middle Class

Maximo Rossi, Universidad del Uruguay - Departamento de Economía (dECON)

Fernando Borraz, Universidad de la Republica
Nicolas Gonzalez, Universidad de Montevideo

 http://works.bepress.com/maximo_rossi/63

Abstract

There is an increasing literature that discusses how to measure the middle class. Some approaches are based on an arbitrary deÖnition such as income quartiles or the poverty line. Recently, Foster and Wolfson developed a methodology which lacks of arbitrariness that enables us to compare the middle class of two di§erent income distributions. We apply this new tool jointly with a complementary method ñrelative distribution approach- to household income data in 1994-2004 and 2004-2010, to analyze the evolution of the middle class and polarization in Uruguay. During the Örst period, which is characterized by an increasing income inequality, we Önd that the middle class declined and income polarization increased. In the second one, where the Uruguayan economy experienced a recovery from the downturn su§ered in 2002, we Önd that the middle class rose and polarization decreased. However, this last result is attenuated when we do not consider the household income imputation because of the new health system implemented in 2008.

Suggested Citation

Maximo Rossi, Fernando Borraz, and Nicolas Gonzalez. 2011. "Polarization and the Middle Class" dECON_Working papers
Available at: http://works.bepress.com/maximo_rossi/63