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Bigger... But Stronger? The Middle Class in Chile and Mexico in the Last Decade

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The analysis of the middle class emerges as a relevant issue given the strong influence that this social group has on societies and also on the economic performance. The aim of this document is to empirically contrast different ways of measuring the middle class, from purely statistical approaches to context-relative and absolute-standard measures, and to vulnerability analysis. The evidence for Chile and Mexico suggests that, based on most measures, the middle class has increased over last decade. Additionally, this document proposes to analyze middle class as those households facing a lower probability of falling into poverty based on several indicators. Despite the inherent increase of middle class by this approach, the analysis shows that the income gap between the middle class and lower class has expanded over 1992-2006 which suggest that the middle class has moved away from the households in the bottom of the income distribution. Furthermore, at least in the case of Chile, it seems that there has been a strengthening of the income of the middle class.
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United Nations Development Programme
Regional Bureau for Latin America and the Caribbean

The Middle Class in Chile and Mexico in the Last Decade
Dagmar Hertova*
Luis F. Lopez-Calva**
Eduardo Ortiz-Juarez**
Keywords: Middle class, Distribution, Vulnerability
JEL Codes: D3, I3, D6
Document prepared for RBLAC-UNDP Project on Middle Class and Indicators of Economic Success in
Latin America and the Caribbean”.
* UN, Department of Economic and Social Affairs **UNDP, Regional Bureau for Latin America and the
Caribbean
The opinions expressed in this document are those of the authors, and do not necessarily represent the views
of the United Nations Development Programme, or those of the Regional Bureau for Latin America and the
Caribbean.
Please cite this document as: Hertova, D., L.F. Lopez-Calva and E. Ortiz-Juarez (2010) „Bigger… but
Stronger? The Middle Class in Chile and Mexico in the Last Decade‟. Research for Public Policy, Inclusive
Development, ID-02-2010, RBLAC-UNDP, New York.
Research for Public Policy
Inclusive Development
ID-02-2010
BIGGER BUT STRONGER?
THE MIDDLE CLASS IN CHILE AND MEXICO IN THE LAST DECADE1
Dagmar Hertova
UN, Department of Economic and Social Affairs
Luis F. Lopez-Calva
Eduardo Ortiz-Juarez
UNDP, Regional Bureau for Latin America and the Caribbean
ABSTRACT
The analysis of the middle class emerges as a relevant issue given the strong
influence that this social group has on societies and also on the economic
performance. The aim of this document is to empirically contrast different
ways of measuring the middle class, from purely statistical approaches to
context-relative and absolute-standard measures, and to vulnerability analysis.
The evidence for Chile and Mexico suggests that, based on most measures, the
middle class has increased over last decade. Additionally, this document
proposes to analyze middle class as those households facing a lower probability
of falling into poverty based on several indicators. Despite the inherent
increase of middle class by this approach, the analysis shows that the income
gap between the middle class and lower class has expanded over 1992-2006
which suggest that the middle class has moved away from the households in
the bottom of the income distribution. Furthermore, at least in the case of
Chile, it seems that there has been a strengthening of the income of the middle
class.
Keywords: Middle class, income distribution, vulnerability
JEL Codes: D31, I30, D63
1 We would like to thank François Bourguignon for helpful comments. The document benefitted from
discussions at the ALCADECA Meeting held in Montevideo and the UNAM‟s Social Affairs Seminar held in
Mexico City.
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1. INTRODUCTION
The concept of social class is an analytical tool widely used in sociology and other social
sciences, but mostly ignored in modern economics. In practice, social classes are usually
defined in terms of income sources. Whichever notion of middle class one chooses to use, it
is important to understand that any definition is dependent on a particular period and place
and is determined by various factors, such as history and development of a society, as well
as cultural aspects. The evidence shows that a strong middle class through its emphasis on
human capital investment, consumption and savings helps to produce economic benefits and
foster economic development, which then in turn contributes to further expansion of the
middle class. Middle class is also the backbone of democracy and ensures social and
political stability in a country by fostering social cohesion and mitigating tensions between
the poor and the rich.
The analysis of the middle class in Latin America emerges as a relevant issue given the
strong influence that this social group has on societies and also on the economic
performance. The middle class is an important source of skilled and productive labor, as
well as a sector that demands a large amount of goods and services, thus stimulating greater
economic dynamism. Moreover, the growth and development of the middle class appears to
be able to stimulate a greater degree of governance and social cohesion. As political
scientists suggest, a strong and stable middle class is usually accompanied by a more „stable
democracy.
This document presents a theoretical overview and an empirical analysis of different ways to
measure size, analyze the evolution and observe the strength of the middle class in Chile and
Mexico. Our aim is not to question the validity of these approaches or measures but to
compare and contrast the results that they generate. From a statistical perspective, the
evidence suggests that the middle class has been growing during the last decade in both
Chile and Mexico. An analysis where the middle class is defined as those non-poor
households facing a lower probability to fall into poverty, with a given probability threshold
representing the beginning for the lower bound of the middle class, suggests that the
percentage of households less vulnerable and therefore the total middle class has also
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increased in both countries. Furthermore, the income gap between the middle class and
lower class has expanded over 1992-2006 which suggests that the middle class has moved
away from the households in the bottom of the income distribution. This result suggests a
strengthening of the middle class income, especially in the case of Chile, which is confirmed
by the statistical measures which show that the Chilean middle class has not only grown in
size but also in the share of income appropriated.
This document is organized as follows. Section 2 discusses what is viewed as the middle
class from sociologic and economic perspectives, highlighting the importance of this group
on economic and sociopolitical aspects. Section 3 provides a literature review analyzing the
middle class as an indicator of success, while section 4 reviews the definitions and measures
of the middle class which are empirically contrasted in section 5.
2. WHAT IS THE MIDDLE CLASS AND WHY IS IT IMPORTANT?
2.1. SOCIOLOGICAL APPROACH
In the field of sociology, the two most famous frameworks for class analysis are that of Max
Weber and Karl Marx. On one hand, the Weberian concept defines class as a group of
individuals with common economic life chances which determine their opportunities for
income in the market. The Marxist view, on the other hand, defines class in terms of
common structural positions within the social organization of production, where class
divisions are based on the concept of exploitation and property relations (Wright 1979).
There have been several approaches to identifying the term „middle class‟ in sociological
literature, but the above frameworks remain as the most influential. Marx‟s (1818-1883)
analysis defined the middle class more specifically as small independent businessmen and
professionals who work for themselves. In particular, these individuals would have acquired
special skills, knowledge or education and would rely only on themselves and their
resources to make money. Marx predicted that this class would gradually diminish as
capitalist enterprises developed and consolidated. This middle class is what later came to be
known as old middle class, when between 19th and 20th century sociologists began to
comment on the changing nature of the middle class and on the emerging new middle class,
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which has evolved during the transformation and modernization of the economy towards
manufacturing, industry and the service sector. Both the old and new middle class can be
characterized by their approach towards obtaining higher education and skills. Even Weber
saw the middle class as those individuals owning skills and education, and John Goldthorpe
defined middle class as those who look to the future and thus see savings and education as
essential (Birdsall, et al. 2000). These characteristics may well be the reason why the
presence of middle class has often been emphasized as being essential for successful and
growing society.
2.2. ECONOMIC APPROACH
In the field of economics, it is more common to define middle class in terms of a measurable
characteristic. Economists usually identify middle class statistically, as groups of individuals
who occupy certain position in a society‟s income distribution. All the above definitions of
middle class, whether in terms of occupations or income or other criteria, are known as an
objective definition, which are reviewed and empirically contrasted in next sections. A
more subjective way to identify middle class -not necessarily consistent with the objective
approach- is to assess those individual who see themselves as belonging to the middle class.
This association is typically based on their orientation towards the values that they see as
representing the average members of society. For example, the World Values Survey allows
us to compare the cases of Chile and Mexico, the two countries analyzed in this document.
By asking individuals what they think about their social class membership, we observe that
over 1996-2000 the „middle class in Mexico fell from 59% to 51%, while the lower class
increased, possibly reflecting the negative effects of the crisis during 1994-95. However, the
trend is opposite in Chile where the self-perceived middle class increased from 63% to
67%, with slight reductions in the remaining classes. Whichever notion of middle class one
chooses to use, it is important to understand that any definition is dependent on a particular
time period and place and is determined by several factors, such as history, culture and the
process of development.
2.3. THE IMPORTANCE OF THE MIDDLE CLASS
There are number of benefits that derive from the existence of a strong and stable middle
class. A strong middle class is crucial in a market-based democracy since it provides the
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invaluable incentives for the market to work at its best. Research on the impact of middle
classes on democracies around the world shows that members of the middle class tend to
behave more rationally when choosing their political representatives. Benefits from the
existence of a middle class can be classified in two main categories: political benefits
(equity/social homogeneity and cohesion, political stability, preference for market reform);
and economic benefits (market-friendly development, enhanced market demand,
productivity and quality of the productive base, employment/skills).
Examples of the economic benefits from the existence of a middle class are the presence of a
large demand and a source of human capital investment. Such consumption pattern is
beneficial to the economy as a whole not only through the increased demand for such goods
when produced internally, but also for tax revenues on these goods. After consumption, the
rest of middle class household incomes often go towards current investment in their
children‟s education and savings towards human capital. The macroeconomic effects of this
behavior are a greatly enhanced labor productivity of future generations and increased skills
for better and more rewarding jobs. Moreover, the major and immediate benefit from the
existence of a healthy middle class for the political sphere derives from the observation that
a large middle class produces relative equity in society, suggesting more stable political and
economic conditions. The absence of a strong and cohesive middle class as a political group
representing its interests can lead to political polarization and consequent long-term political
destabilization of the society.
3. MIDDLE CLASS AS AN INDICATOR OF SUCCESS
3.1. THE ECONOMY SIDE
While the extent of literature analyzing the significance of middle class for the economy has
been more limited, there are some interesting studies that look at various channels and
aspects of this relationship. Easterly (2001) empirically argues that countries with a large
middle class have higher levels of income and grow faster, as long as they are not too
ethnically diverse. This concept of middle class consensus‟ implies a situation where there
is relative income equality, high share of income going to the middle class, and a high
degree of ethnic homogeneity. Easterly‟s model identifies inequality and ethnic diversity as
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the main determinants of incentives for future investment, which in turn affects growth and
income. Following this work, Josten (2005) looks at a slightly different channel through
which the middle class consensus affects growth and that is by focusing on the role of
social capital and transaction costs.2 Through his heterogeneous-agents, endogenous-growth
model Josten shows that a decrease in the size of the middle class lowers the social capital of
a community, leading to increased economy-wide transaction costs and thus lowering the
growth rate of the economy.
A comprehensive study by Solimano (2008) presents empirical correlations between the size
of the middle class and different economic variables for 129 countries. His analysis suggests
a positive relationship between the share of the middle class and the level of economic
development, with the correlation coefficient between the size of the middle class and per
capita income of 0.41. The evidence suggests that high income countries have higher share
of the middle class -nearly 6 percentage points higher than middle income and low income
countries. The results also show a negative correlation between income inequality and the
size of the middle class, suggesting that countries that have more unequal income
distribution have relatively smaller middle class. An interesting finding is that the
correlation between per capita income and income inequality is stronger for the groups in the
lower-middle of income distribution (third to sixth deciles) than the upper-middle (seventh
to ninth deciles), suggesting that lower inequality and higher economic growth would be
relatively more beneficial for people whose incomes are closer to those of the poor than
those of the rich.
The significance of the middle class can also be depicted in terms of its emphasis on human
capital accumulation. Doepke and Zilibotti (2007) propose a theory where society is divided
into middle class and upper class families who are distinguished from each other by their
occupations, attitudes and preferences towards work and leisure. The middle class are in
occupations that require skills and experience and they thus develop work ethics and
patience, whereas the upper class families rely on rental income which allows them to
2 Josten‟s consensus differs from Easterly‟s definition, as it is defined as the existence of a middle class whose
members share „a fairly homogenous set of social orientations‟.
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nurture their taste for leisure. The authors argue that these class-specific attitudes evolve
over time and that they are the main determinants of success in an industrialization process.
Galor and Zeira (2003) also demonstrate how initial wealth distribution significantly affects
growth through human capital accumulation, not only in the short term, but also in the long
run, given that an individual‟s inheritance determines his or her investment in human capital.
There are multiple long-term equilibria depending on the initial distribution of wealth. An
economy that starts off as poor, will end up just as poor as an economy with large initial
wealth that is held only by a few. However an economy with large initial wealth that is
distributed among many will end up rich, or in other words, a country with larger middle
class is likely to grow more in the long run.
Another important role of middle classes is that of customers and consumers and their
contribution to the size and growth of the domestic market. Murphy, et al. (1989) highlight
the importance of a strong middle class as a source of buying power of domestically
manufactured goods. They posit that only if domestic markets are large enough can
countries profitably industrialize and one condition inductive of successful industrialization
is an equally distributed income that ensures strong demand for domestic goods. They
propose a model where there are two distinct classes of consumers: the upper class, which
pays for the fixed costs of industrial production, and the middle class, whose spending
determines the pure profits from industrialization. Hence, an equal society, with large share
of middle class, is a key to successful and profitable industrialization.
On a different view, Birdsall (2000) suggests that policies should support not only the poor
but at the same time also the middle class. This work defines an inclusive growth as that
which extends the pro-poor growth to the majority of people and as growth that is more
likely to be economically and politically sustainable. The argument is that economic
situations that are good/bad for the poor are also likely to be good/bad for the middle class
and that a strong middle class is advantageous for the poor by being more likely to support
policy reforms that improve openness, maintain price stability and also by insisting on
accountable governments.
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3.2. POLITICAL STABILITY, DEMOCRACY AND SOCIAL COHESION
Since Aristotle, the significance of equal society and strong middle class has been
emphasized as one of the key fundamentals of democracy and a guarantee of political and
social stability.3 When talking about the political role of the middle class Seymour Martin
Lipset (1959) stated that “a large middle class plays a mitigating role in moderating conflict
since it is able to reward moderate and democratic parties and penalize extremist groups”.
An empirical analysis of the impacts on democracy is presented in Barro (1999) which
shows that the share of the middle three quintiles is the most important aspect of income
inequality that positively affects the extent of democracy. Thus, higher income inequality
can have a negative effect not only on political stability, but also on social stability and
social cohesion. Similar results were found in Perotti (1993), who argues that initial income
distribution determines the amount of redistribution in political equilibrium. Middle class
cannot be too far apart from the upper class and too far apart from the lower class in order to
ensure such a redistribution so that every class invests in human capital thus leading to
higher growth and greater political stability.
Alesina and Perotti (1996) also develop a theory where income inequality, indicated by the
share of the middle class, increases socio-political instability and uncertainty which then has
a negative effect on investment and consequently growth. The authors test this hypothesis on
a sample of 71 countries for the period 1960-1985 in a two equation system in which the two
endogenous variables are investment and an index of socio-political stability -based on
variables measuring social unrest. Their findings support the argument that income
inequality creates more political unrest, and that the presence of a wealthy middle class
reduces socio-political instability.
In the light of social cohesion, Easterly, et al. (2000) analyze what makes good politicians
adopt bad policies. They argue that politicians, especially in developing countries, are
3 “It is possible for those states to be well governed that are of the kind in which the middle-class is numerous,
and preferably stronger than both the other two classes, or at all events than one of them, for by throwing in its
weights it sways the balance and prevents the opposite extremes from coming into existence ”[…]“Surely the
ideal of the state is to consist as much as possible of persons that are equal and alike, and this similarity is
most found in the middle classes” (Aristotle, 1932)
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socially constrained in introducing reform policies and that these constraints are affected by
the degree of social cohesion within a country. The authors discuss the different measures
employed as indicators of social cohesion, including the income share of the middle three
quintiles, and find that the most cohesive societies are those with higher income share of
middle class and least ethnically diverse. Such societies have good policies, good politicians
and higher quality institutions, thus always growing faster, a result similar to that of Easterly
(2001).
Within the social structure the middle class essentially serves as a buffer between the poor
and the rich in preventing social tensions or possible conflicts. Those tensions arising from
conditions such as social hierarchies and cleavages and resulting in marginalization of some
groups and privileging of others, along class or ethnic lines for example, are defined as
structural tensions. Distribution of income and the economic gaps between social groups are
both indicators of structural tensions and the deeper these tensions are the higher the
probability of outbreak of (possibly even violent) conflicts (Leatherman, et al. 1999). This
suggests that the presence of a middle class positioned between the rich and poor works as a
force mitigating the tensions and possible conflicts between the two groups.
4. DEFINITIONS AND MEASURES OF THE MIDDLE CLASS4
4.1. STATISTICAL AND ABSOLUTE MEASURES
A common way in which economists measure the middle class is in relation to its position in
the income distribution. Statistical measures identify the middle class as consisting of
households with per capita income in a certain range around the median household per
capita income. For example, Blackburn and Bloom (1985) measure middle class as
households with per capita income in the range of 0.60 and 2.25 times the median household
per capita income. Using a narrower range, Davis and Huston (1992) classify as middle class
4 Except for the vulnerability analysis of the middle class suggested in this section, the statistical and absolute-
standard approaches, and also the polarization measures, are widely discussed by Foster and Wolfson (2009).
Regarding to polarization measures (see for example Esteban and Ray 1994) some studies have empirically
applied it to the analysis of the middle class. The recent analysis by Cruces, et al. (2010) constitutes a good
example.
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those families with incomes between 0.50 and 1.50 times the median income, while Birdsall,
et al. (2000) use a range between 0.75 and 1.25.
Alternatively, one can employ a pure income measure, where the middle class is simply a
certain percentage share of the income distribution. The disadvantage of this measure is that
the size of the middle class will always be fixed. However, it allows quantifying the share of
total income appropriated by this group. For example, Alesina and Perotti (1996) use the
share of income of the third and fourth quintiles of the income distribution, Partridge (1997)
use the middle quintile, Barro (1999) and Easterly (2001) use the middle three quintiles, and
Solimano (2008) the third to ninth deciles. All these measures can be formalized in terms of
percentiles of the income distribution, as shown in Table 1, where indicates a percentile
, and the per capita income of a household x.
Table 1. Statistical measures of the middle class
In terms of percentiles of the income distribution
Blackburn and Bloom (1985)


      
Davis and Huston (1992)
      
Birdsall, et al. (2000)
      
Alesina and Perotti (1996)
 
Partridge (1997)
 
Barro (1999) and Easterly (2001)
 
Solimano (2008)
 
A comprehensive study conducted by The Economist and The Pew Global Attitudes Project
in 2009 suggests the existence of two types of middle class.5 One measured by a monetary
standard but not strictly comparable- according to the context of each country (for instance,
as those households with income between the official poverty line, and a well-off threshold
determined by the average income level in some point of the country‟s income distribution),
and one measured by a monetary and comparable standard (for instance, as those households
with income in a specific range expressed in standardized international dollars).
5 The Economist, Special Reports, February 12th 2009.
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While a variation of the first type of middle class is proposed in next subsection, the second
type has been probably the most analyzed in empirical literature. For example, Milanovic
and Yitzhaki (2002) look at the middle class in global perspective by identifying the middle
income group of the whole world. They choose to divide the world population into three
groups and to identify the middle class as those individuals with per capita income between
the mean per capita income of Brazil and Italy. In an influential study, Banerjee and Duflo
(2008) define middle class as households with per capita expenditures at purchasing power
parity (PPP) between $2 and $10. Based on these thresholds, they use household survey data
for 11 developing countries to analyze the consumption, employment patterns and other
aspects of lives of the middle class. In a similar way, Ravallion (2009) recently proposed the
concept of „developing world‟s middle class‟ defined as those who are not considered poor
by the poverty lines of developing countries, but are still poor by the poverty lines of rich
countries. Middle class is thus defined as those households with consumption per capita
between $2 (the median poverty line for 70 developing countries) and $13 (the US poverty
line) a day at 2005 PPP.6
4.2. VULNERABILITY APPROACH
An alternative way proposed in this document is to analyze the middle class in terms of
vulnerability of households to fall into poverty, as estimated by a logistic model, according
to the Chilean and Mexican realities. In other words, we correlate the poverty status of
households with different socioeconomic indicators to obtain probabilities of being poor. In
next specification, the dependent variable  represents the poverty status of the 
household measured by the official poverty line in each country and takes value of 1 if the
household is poor and 0 otherwise;      is a vector of observable
characteristics that includes dwelling indicators (access to running water and floor
materials), as well as socioeconomic characteristics of the head (education, sex, age, access
to social security, occupational status, and an indicator for rural residence to capture
6 Additionally, Ravallion separates this classification into upper and lower tiers through a dividing line of $9 a
day. This line is the highest poverty line in his sample of developing countries, which corresponds to Uruguay.
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geographical isolation); and       is a vector of model parameters.7 The
estimated probability  for a household is thus given by:
   

These probabilities are used to set a threshold so that those non-poor households at or below
are identified as less vulnerable to poverty and therefore can be considered as the lower
bound of the middle class -this threshold is proposed to be fixed at 0.5. In addition, we
assume that the upper end of the middle class is determined by a „well-off‟ threshold whose
value is the median of the income in decile 9.8 Notice that this definition allows us to
identify three additional classes: lower class, with income at or below the official poverty
line; upper-class, with income above the „well-off‟ threshold; and vulnerable class, with
income above the poverty line but with probabilities of being poor above 0.5 (see Figure 1).
Figure 1. Class classification from vulnerability analysis
5. EMPIRICAL ILLUSTRATION: THE MIDDLE CLASS IN CHILE AND MEXICO
The empirical estimates of previous approaches are based on national representatives
surveys data for both countries over 1992-2006. In the case of Mexico we use data from the
7 Coefficients from this correlation analysis and statistics of the variables used are shown in Appendix 2 and 3.
Some methods identifying determinants of vulnerability to poverty are formalized in Calvo and Dercon (2007).
8 A further analysis we are implementing also observes the determinants of transitions from middle class to
poverty and vice versa, based on panel data for Chile (CASEN Panel) and Mexico (MxFLS) over the first years
of the current decade.
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National Household Consumption and Expenditure Survey (ENIGH), carried out by the
National Institute of Statistics and Geography (INEGI), which collect information on
household income and expenditure, dwellings characteristics and data on household
members related to age, sex, employment, occupation and education. For Chile, we use the
Socioeconomic Characterization Survey (CASEN), undertaken by the Chilean Ministry of
Planning (MIDEPLAN). With the exception of household expenditures, this survey collects
similar information to that collected by the ENIGH.
5.1. THE SIZE OF THE MIDDLE CLASS FROM A STATISTICAL VIEW
According to the definition of Davis and Huston (1992) the proportion of middle class
increased from 46.7% to 48.7% in Chile and from 45.8% to 47.8% in Mexico. This trend is
consistent with that obtained when using the definition of Birdsall, et al. (2000) by which
Chile‟s middle class rose from 22.1% to 24.4% and Mexico‟s middle class from 22% to
24% (see Figure 2).9
Figure 2. The size of the middle class in Chile and Mexico
Percentage of households
Source: Own estimates from CASEN and ENIGH, 1992-2006
Regarding the measures that identify the middle class as a certain percentage of the income
distribution, Figure 3 shows that under any of these measures in 1992 the middle class in
Mexico received a higher income share than the middle class in Chile. In the following
9 The increase of the size of middle class in Chile and Mexico showed in this work is trend-consistent with
results from previous work by Birdsall, et al. (2000) who analyze the middle class in high income countries,
and in transition and Latin American economies.
46.7
45.8
48.7
47.8
35.0
40.0
45.0
50.0
Chile
Mexico
Davis and Huston (1992)
1992
2006
22.1
22.0
24.4
24.0
15.0
20.0
25.0
Chile
Mexico
Birdsall, et al. (2000)
1992
2006
- 15 -
years, however, the growth of this share was faster in the latter, thus dramatically widening
the gap between the two countries in the opposite direction. By 2006 both countries
experienced a significant drop, causing the income share of the middle class in Mexico to
fall to levels even lower than those of 1992.
Figure 3. Income of the middle class in Chile and Mexico, 1992-2006
Share of total income
Source: Own estimates from CASEN and ENIGH, 1992-2006
These patterns are consistent with those obtained by observing the distribution of the income
shares by deciles. While in Chile the income share for deciles 1 to 8 increased by about 1
percentage point on average between 1992 and 2006, the income share of the highest decile
decreased by 7.6 percentage points in the same period. In Mexico, conversely, the deciles 1
to 8 experienced a drop in their income share by 0.3 percentage points, on average, while for
the upper two deciles it increased by 1.3 percentage points.
If the size of the middle class has grown in both countries, even though a divergent pattern
on income appropriation was observed, how have the socioeconomic indicators of these
30.3
34.2
33.4
31.7
25.0
27.0
29.0
31.0
33.0
35.0
37.0
1992
1994
1996
1998
2000
2006
Alesina and Perotti (1996)
Chile
Mexico
12.3
14.6
13.6
11.9
10.0
11.0
12.0
13.0
14.0
15.0
16.0
1992
1994
1996
1998
2000
2006
Partridge (1997)
Chile
Mexico
38.5
45.3
42.2
39.6
30.0
35.0
40.0
45.0
50.0
1992
1994
1996
1998
2000
2006
Barro (1999) and Easterly (2001)
Chile
Mexico
52.7
59.3
57.6
56.3
48.0
50.0
52.0
54.0
56.0
58.0
60.0
62.0
64.0
1992
1994
1996
1998
2000
2006
Solimano (2008)
Chile
Mexico
- 16 -
households evolved? We observe some characteristics of the middle class household heads,
in terms of the definitions of Birdsall, et al. (2000) and Solimano (2008). The middle class
has experienced advances in education in both countries, shown in Appendix 1. However, in
1992 the percentage of household heads with some university degree was higher in Chile
than in Mexico, a situation that was reversed slightly towards 2006.
Regarding social security, improvements in coverage are clear in the case of Chile, while in
Mexico coverage has receded. This result is also confirmed by data from individual
employment categories. In terms of employment sectors, the middle class employed in the
sectors of commerce, transport and communication, and mostly also in community and
social services has expanded between 1992 and 2006 in both countries. In Chile, there has
been a large increase in the employment of the middle class in the financial services sector,
while in Mexico it has declined.
Furthermore, the percentage of population identified as „blue collar‟ middle class workers
and middle class farmers has fallen, while the proportion of „white collar‟ middle class
workers and middle class technicians, teachers, service sector workers, sellers or trade sales
agents has increased. This result observes similarities with the sociological concept of new
middle class described in Section 2, which argues that middle class accumulate education
and skills over time and expands its role in the economy towards manufacturing, industry
and the service sector.
5.2. VULNERABILITY MEASURES
Following the methodology described in subsection 4.2, the percentage of middle class
households increased from 52.6% to 73.4% in the case of Chile, and from 57.3% to 67.2%,
in the case of Mexico over 1992-2006 (see Figure 4). A breakdown by probability intervals
shows that this increase is dramatically higher in Chile than in Mexico for lower intervals.
For example, at the interval between 0 and 0.2 the size of middle class households rose by
43 and 14 percentage points, respectively. Previous figures suggest that in 2006 a higher
number of households, in both countries, faced lower probabilities of fall into poverty than
in 1992, which can be a signal of strengthening.
- 17 -
Figure 4. The size of the middle class and its distribution by probability intervals
Percentage of households, Chile and Mexico 1992-2006
Source: Own estimates from CASEN and ENIGH, 1992-2006
In the case of households „more vulnerable‟ to poverty which are not defined here as middle
class because their probabilities to fall into poverty are above 0.5, the percentage declined
significantly in the case of Chile where the proportion fell from 4.3% to 0.4% over 1992-
2006. In Mexico, however, the decline was only about half that of Chile (from 4.5% to 2%),
so that in 2006 about 500 thousand Mexican households were still highly vulnerable to fall
into poverty due to shocks.
How has the income of the middle class evolved relative to other groups, for instance, the
poor households? An approximation to answer this question is to estimate a variation of an
index proposed by Foster, et al. (1984), known as the  measure, in order to observe the
income gap between the middle class and the lower class, where the threshold is the value of
the official poverty line in each country.10 As expected, as the probability of being poor
decreases, the gap between the income of the middle class and the poverty line expands in a
consistent way (see Figure 5). The most interesting result, however, arises when comparing
the gap in 1992 to that in 2006. It is clear that the gap has expanded significantly in both
countries over time, which makes it evident that the middle class has, on average, moved
10 The family of indices proposed by Foster, et al. (1984) is defined as  
 
 where
  
 , being a poverty threshold and the income of middle class household i. In the context of
poverty, the coefficient is a measure of poverty aversion. When   , as used here, the measure represents
a gap showing how far away the middle class household i is from the poverty line.
5.8
10.9
14.4
14.6
6.9
52.6
0.8
2.0
6.1
22.1
42.3
73.4
0
10
20
30
40
50
60
70
0.5
0.4
0.3
0.2
0.1
Total ≤ 0.5
Probability of being poor
Chile
1992
2006
3.1
5.3
12.4
20.4
16.1
57.3
1.5
4.3
10.8
22.1
28.5
67.2
0
10
20
30
40
50
60
70
0.5
0.4
0.3
0.2
0.1
Total ≤ 0.5
Probability of being poor
Mexico
1992
2006
- 18 -
away from the poverty line. However, a much larger widening of the gap occurring in Chile
suggests an „enrichment‟ of the Chilean middle class.
Figure 5. Income gap of the middle class to poverty line by probability intervals
Chile and Mexico 1992-2006
Source: Own estimates from CASEN and ENIGH, 1992-2006
To validate the increase of the middle class in Chile and Mexico, Figure 6 shows Kernel
distributions of income in 1992 and 2006. From these distributions, it can be seen that the
bulge in the middle has grown over the period making the bell taller and confirming that the
middle class has increased, partly due to improvements in income distribution (motivated by
an expansion and enhancement of social programs), combined with a reasonable
performance in economic growth, which is evident by a movement of the bell to the right.
Figure 6a. Change in income distribution in Chile, 1992-2006
Household per capita income in 2006 prices
0.00
0.50
1.00
1.50
2.00
2.50
0.5
0.4
0.3
0.2
0.1
0.5
0.4
0.3
0.2
0.1
Mexico
Chile
1992
2006
0.1 .2 .3 .4 .5
6 8 10 12 14 16
Household per capita income: log scale
Chile 1992
0.1 .2 .3 .4 .5
6 8 10 12 14 16
Household per capita income: log scale
Chile 2006
- 19 -
Figure 6b. Change in income distribution in Mexico, 1992-2006
Household per capita income in 2006 prices
Source: Own estimates from CASEN and ENIGH, 1992-2006
Note: The dotted lines represent the official poverty line and the well-off threshold in each country.
5.3. THE ABSOLUTE-STANDARD MIDDLE CLASS
The analysis of Ravallion (2009) using standardized household surveys for a sample of
almost 100 developing countries shows that the middle class in developing world grew from
32.8% in 1990 to 48.5% in 2005 (see Table 2). These figures suggest that more than 1.2
billion people joined the middle class over 1990-2005, of which China accounts for half of
this amount. Extending the calculations back by a decade, the middle class in Latin America
and the Caribbean also increased from 61.3% in 1981 to 63.2% in 1990 and to 65.8% in
2005, which represents an absolute amount of 138 million people.
Table 2. Distribution of absolute-standard middle class in developing world, by region
People living on between $2 and $13 a day
Region
1981
1990
2005
Millions
%
Millions
%
Millions
%
East Asia and Pacific
98.2
7.1
315.5
19.8
1,117.1
59.3
Eastern Europe and Central Asia
332
78.6
355.3
76.3
347.8
73.4
Latin America and the Caribbean
224.2
61.3
276.7
63.2
362.1
65.8
Middle East and North Africa
118.5
68.3
170.2
75.5
240.1
78.7
South Asia
124.3
13.5
192.7
17.2
380.2
25.8
Sub-Saharan Africa
99.9
25.1
117.7
22.8
197.1
25.9
Total
997.1
27.2
1,428.1
32.8
2,644.3
48.5
Source: Own estimates based on Ravallion (2009) and World Bank, PovcalNet
0.1 .2 .3 .4 .5
2 4 6 8 10 12
Household per capita income: log scale
Mexico 1992
0.1 .2 .3 .4 .5
2 4 6 8 10 12
Household per capita income: log scale
Mexico 2006
- 20 -
Although this „absolute-standard‟ approach has triggered an important debate on
internationally comparable measurement of the middle class, for the countries analyzed in
this work, however, there is no consistency between the results obtained using the different
measures contrasted previously and using Ravallion‟s definition: while the „absolute-
standard‟ middle class increased slightly in Mexico and has practically not changed in Chile
between 1992 and 2006 (see Table 3), the statistical measures of the middle class, and also
the vulnerability analysis, suggest a notable increase in both countries, as shown above.
Table 3. People living on between $2 and $13 a day in Chile and Mexico
Percentage of total population
Country
1992
2006
Chile
68.9
68.0
Mexico
69.0
70.1
Source: Own estimates from CASEN and ENIGH, 1992-2006
Note: Calculations are based on 2005 Purchasing Power Parity (PPP) exchange rates for household
consumption from the 2005 ICP.
These divergences are of course due to the different monetary thresholds used in different
measures. For example, the highest value that Ravallion uses is $13 a day, while the
measurement of the middle class relative to the contexts in Chile and Mexico uses around
$25 a day as the highest value, which represents the median income in decile 9. Hence, it is
clear that Ravallion‟s approach is focused on the lower bound of the income distribution for
comparative purposes in the developing world. Therefore, in a comprehensive study on the
middle class the inclusion of an absolute-standard measure might involve classifying
substantial proportion of households that are poor according to each country's official
poverty line as middle class, which is likely the case for the analysis of Chile and Mexico
carried out here.
CONCLUDING REMARKS
The above discussion suggests that the size and composition of the middle class is critical
for strengthening and stabilizing the democratic system and its institutions, and for the
functioning of the economy. Indeed, the middle class appears to be an important source of
- 21 -
skilled and productive workers, as well as a source of demand for goods and services,
thereby encouraging greater economic dynamism. At the same time, growth and
development of the middle class can lead to a better level of governance and promote social
cohesion.
The results from estimating the various measures discussed above suggest an increase in the
size of the middle class in both countries over the period analyzed. This result is
undoubtedly very important in light of the reasons outlined previously. Analyzing the
educational and occupational characteristics of the heads of middle class households, the
results show that in recent years there have been significant improvements in many of them.
However, there has been deterioration in several other indicators as is for example shown by
the case of declining social security coverage in Mexico which calls for public policy action.
In terms of income, the analysis shows some interesting results. On one hand, the share of
income captured by the middle class relative to the total population has increased in Chile
between 1992 and 2006, caused mainly by a decrease in the income share of the households
in the highest income decile. This is not the case for Mexico, where by 2006 the income
share of the middle class fell to levels lower than those of 1992. On the other hand, the
vulnerability approach showed a widening of the gap between the income of the middle
class and the poverty line in each country. However, when comparing the gap over 1992-
2006 it is clear that it has expanded remarkably in Chile suggesting a strengthening of the
income of Chilean middle class households.
Overall, most measures reviewed for Chile and Mexico confirm that middle class is
currently bigger than in 1992, partly due to improvements in income distribution and partly
due to a reasonable performance in economic growth in recent years. However, the same
measures suggest that the strengthening of this social group has not been the same in both
countries, neither in terms of income, nor in important socioeconomic characteristics.
Furthermore, it appears that an important number of Mexican families remain vulnerable to
the transitory or permanents effects of shocks.
- 22 -
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- 24 -
Appendix 1. Characteristics of the middle class households in Chile and Mexico, 1992-2006
Percentage of households in each category
Households whose head
Mexico
Chile
Mexico
Chile
1992
2006
1992
2006
1992
2006
1992
2006
Middle class defined as
Birdsall, et al. (2000)
Solimano (2008)
has complete secondary education or more /a
23.0
41.8
41.6
54.3
30.5
48.7
47.8
60.3
has incomplete university
2.4
3.6
2.4
3.9
3.5
5.9
3.5
5.0
has complete university
2.0
7.5
3.8
6.2
4.4
12.3
6.6
11.1
has social security/b
36.0
30.9
46.3
51.4
36.9
33.7
47.8
54.1
has social security if employed/b
44.2
37.3
65.0
68.8
45.0
41.0
65.3
68.4
is employed
81.6
82.9
71.2
67.6
82.0
82.3
73.2
71.4
is employed in
- agriculture
16.9
10.6
15.2
14.5
16.0
10.4
14.5
12.7
- energy and water
1.5
0.8
3.7
2.8
1.8
1.3
4.4
3.1
- manufacturing
19.4
18.3
17.6
14.5
19.1
16.9
17.8
14.6
- construction
10.6
12.0
13.0
13.0
9.9
11.5
11.9
11.7
- commerce
17.6
19.9
14.8
17.1
17.5
17.6
16.0
17.4
- transport and communications
6.1
7.8
9.6
10.0
5.6
7.8
9.6
9.9
- financial services
0.8
0.7
2.8
6.1
1.5
1.3
3.9
6.5
- community and social services
27.1
29.9
22.7
21.4
28.7
33.1
21.3
23.3
is employed as/c
- "white collar"
7.6
8.1
12.7
12.6
11.6
13.2
17.3
17.5
- "blue collar"
41.0
36.0
39.3
37.5
36.2
33.8
35.9
34.8
- farmer
16.4
10.0
7.5
7.5
15.8
9.7
7.3
6.8
- technician or teacher
4.4
4.8
4.4
5.0
6.0
7.1
5.9
7.1
- service sector worker, seller or trade sales agent
16.6
21.8
10.5
12.3
16.9
19.6
11.0
12.0
- not qualified
9.5
14.8
23.4
24.2
10.1
12.9
20.7
20.8
has social security and is employed as
- "white collar"
71.7
69.2
75.7
75.7
77.6
68.6
77.0
77.0
- "blue collar"
50.7
43.4
66.7
70.0
50.4
44.2
65.8
67.5
- farmer
6.2
6.0
42.1
44.3
7.9
6.3
41.1
45.9
- service sector worker or seller
37.4
30.5
60.9
67.9
37.4
31.7
59.4
67.2
- “not qualified”
31.7
14.5
60.2
67.3
25.6
17.9
59.1
65.0
Source: Own estimates based on ENIGH and CASEN, 1992-2006. /a In Mexico 9 or more years of schooling; in Chile 8 or more years. /b For Mexico we include medical services
provided from IMSS, ISSSTE, local institutions, PEMEX, SEDENA, MARINA, universities and private services. For Chile we take the various provisional systems. /c “white
collar”: professionals, administrative staff and executives of the public, private and social sectors; “blue collar”: inspectors, supervisors and other workers of the industrial
production; artisans and factory workers in the processing industry and workers in repair and maintenance; plant and machinery operators; drivers and assistant drivers of mobile
machinery and transportation; “not qualified”: laborers and unskilled workers in the process of industrial production; hawkers and workers in domestic services.
- 25 -
Appendix 2. Descriptive statistics for variables used in regression. Chile and Mexico, 1992-2006
Percentages and averages
Variables
Chile
Mexico
1992
2006
1992
2006
Characteristics of households
Incidence of poverty/a
28.0
11.3
23.2
16.1
No piped water
11.9
7.7
18.4
9.6
Unfinished floor
4.0
0.8
15.7
7.0
Rural
15.8
13.1
36.5
34.5
Characteristics of the head
No education
5.7
3.7
17.9
10.0
Primary
45.7
36.2
48.2
39.1
Junior high
30.3
31.6
15.8
20.4
High school
5.8
9.7
7.5
10.6
College
12.5
18.8
9.8
18.3
Head female
20.7
29.7
14.2
25.1
Head male
79.3
70.3
85.8
75.0
Head age
47.7
51.2
44.0
47.0
Farmers
7.7
7.0
23.1
15.8
Unskilled
23.8
21.9
10.5
13.7
Blue collar
33.0
32.3
31.6
30.5
Work in services and commerce
5.7
7.2
6.1
6.8
Professional
10.2
10.9
15.1
17.8
White collar
19.5
20.8
13.6
15.5
Not working
26.5
28.9
16.6
17.8
No social security/b
26.7
47.0
67.3
69.6
Source: Own estimates based on ENIGH and CASEN, 1992-2006. /a For Mexico the incidence corresponds to the Capacities Poverty. /b
For Mexico we include medical services provided from IMSS, ISSSTE, local institutions, PEMEX, SEDENA, MARINA, universities
and private services. For Chile we take into account the coverage to different provisional systems.
- 26 -
Appendix 3. Coefficients from correlation model between poverty and socioeconomic indicators
Logistic regression analysis, Chile and Mexico, 1992-2006
Variables
Chile
Mexico
1992
2006
1992
2006
Education level
-0.503***
-0.462***
-0.729***
-0.534***
(0.027)
(0.037)
(0.064)
(0.053)
Head age
-0.052***
-0.050***
-0.027***
-0.033***
(0.002)
(0.002)
(0.004)
(0.003)
Head male
0.088
-0.249***
0.371*
0.184
(0.069)
(0.069)
(0.150)
(0.102)
Rural
-0.850***
-1.095***
-0.235
-0.065
(0.060)
(0.077)
(0.126)
(0.101)
No social security/a
-0.012
0.535***
0.658***
0.712***
(0.041)
(0.053)
(0.118)
(0.107)
No piped water
0.287***
0.529***
0.501***
0.429***
(0.063)
(0.096)
(0.113)
(0.098)
Unfinished floor
0.329***
0.746***
0.940***
1.034***
(0.086)
(0.172)
(0.117)
(0.100)
Farmers [omitted]
.
.
.
.
Unskilled
0.448***
0.330***
-0.097
-0.519***
(0.065)
(0.084)
(0.159)
(0.114)
Blue collar
-0.184**
-0.230**
-0.535***
-1.016***
(0.071)
(0.089)
(0.148)
(0.120)
Work in services and commerce
-1.263***
-1.197***
-0.940*
-1.348***
(0.141)
(0.230)
(0.393)
(0.259)
Professional
-0.405***
-0.442***
-0.847***
-1.109***
(0.091)
(0.120)
(0.168)
(0.138)
White collar
-1.240***
-1.316***
-0.770**
-1.775***
(0.101)
(0.147)
(0.272)
(0.324)
Constant
2.290***
1.118***
0.276
0.584**
(0.135)
(0.174)
(0.289)
(0.240)
Observations
25,625
49,505
8,600
16,765
Pseudo R2
0.149
0.123
0.211
0.201
Source: Own estimates based on ENIGH and CASEN, 1992-2006
/a For Mexico we include medical services provided from IMSS, ISSSTE, local institutions, PEMEX, SEDENA, MARINA, universities
and private services. For Chile we take into account the coverage to different provisional systems.
Dependent variable is the poverty status of households.
Robust standard errors in parentheses, * p<0.05, ** p<0.01, *** p<0.001
... Según este enfoque, la clase media se construye mediante transmisión y ampliación de capacidades y privilegios logrados por vía del capital y social, por su pertenencia material y simbólica (Bourdieu, 1979;Hopehnayn, 2010aHopehnayn, , 2010breferidos por Castro, 2015). Desde una perspectiva económica, para definir a la clase media como un grupo que ocupa cierta posición en la distribución de ingresos de la sociedad, se consideran una serie de características cuantificables por medio de estadísticas (Hertova, López-Calva & Ortiz-Juárez, 2010, referido por Castro, 2015: ingreso del hogar, consumo, estatus ocupacional (Dayton-Johnson, 2015; referido por Castro). La existencia de las clases medias tiene impactos políticos y económicos como cohesión y homogeneidad sociales, estabilidad política, crecimiento del mercado, así como incrementos en la demanda, la productividad y la calificación de la fuerza laboral (Castro, 2015). ...
Thesis
En esta investigación, analizo el el imaginario social de Venezuela como una nación moderna en el cine empresarial producido por las compañías petroleras establecidas en el país entre 1947 y 1968, a través de sus representaciones del proceso de urbanización. Para lograr esto, abordé la producción y mediación de películas empresariales como modalidades discursivas y prácticas sociales de objetivación del sentido. Me posicioné desde el paradigma hermenéutico y enfoqué mi objeto de estudio desde el enfoque simbólico-estructural de la cultura, la hermenéutica profunda y el estudio del cine empresarial desde la arqueología de los medios. En la primera parte de esta investigación, examino las principales transformaciones ocurridas en la sociedad venezolana como consecuencia del auge petrolero, a la luz de la discusión sobre la modernidad, la modernización y la nación. Además, reinterpreto tales transformaciones desde los conceptos de petroestado, Estado mágico y renta petrolera, tomando en cuenta las relaciones entre el Estado y las compañías petroleras extranjeras. En la segunda parte de mi trabajo, examino el modelo de producción y circulación del cine empresarial de las petroleras en Venezuela, a la luz de la investigación sobre los imaginarios sociales, las representaciones y el cine multisituado. Lo contextualizo, además, en la división internacional del trabajo y la naturaleza que marcó el despliegue de las compañías petroleras transnacionales. En la tercera y última parte de mi investigación, analizo 10 filmes empresariales de las petroleras en Venezuela, enfocando sus representaciones de la urbanización a través de tres formas espaciales características: la ciudad, el campo petrolero y las comunidades no urbanas. En mi análisis, consideré el rol las formas retóricas y estéticas del cine empresarial en la construcción del imaginario social y las contextualicé dentro de las políticas de relaciones públicas de las petroleras, de cara al Estado y la sociedad venezolanos.
... En esta línea, la estratificación social de Goldthorpe ha dominado el análisis de clase y movilidad social durante las dos últimas décadas debido a su atractivo empírico (Erikson y Goldthorpe, 1993;Goldthorpe, 1987). Más recientemente, han surgido otros planteamientos dentro de esta misma línea de análisis que incluyen la vulnerabilidad económica al análisis tradicional de clase (Goldthorpe y McKnight, 2004 Como se apuntó, las nociones relativas se vinculan de manera clara a discusiones de economía política. Por ejemplo, los beneficios de la existencia de una clase media fuerte se relacionan con una mayor equidad social, la cual es pieza fundamental de la democracia y garantía de estabilidad política y social. ...
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