Stuck in the Middle

Stuck in the Middle: Is Fiscal Policy Failing the Middle Class?

Antonio Estache
Danny Leipziger
Copyright Date: 2009
Pages: 199
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  • Book Info
    Stuck in the Middle
    Book Description:

    Stuck in the Middleexamines both economic and social public policy initiatives in its assertion that enhancing the welfare of people in developed and developing nations requires an explicit focus on the middle class.

    Contents Foreword 1. Overview: Fiscal Policy, Distribution, and the Middle Class 2. Stylized Facts on the Middle Class and the Development Process 3. The Future of Global Income Inequality 4. The Scope and Limits of Subsidies 5. Policies for Lower Global Wealth Inequality 6. Can Happiness Research Help Fiscal Policy? 7. The Politics of Effective and Sustainable Redistribution

    eISBN: 978-0-8157-0345-7
    Subjects: Political Science, Business

Table of Contents

  1. Front Matter
    (pp. i-iv)
  2. Table of Contents
    (pp. v-vi)
  3. Foreword
    (pp. vii-viii)
    Justin Yifu Lin

    It is well established that many more people consider themselves to be part of the middle class than actual income data would substantiate. And the economic success of the middle class is often seen as synonymous with welfare gains in societies in both developed and developing countries. Yet our ability to accurately tell how the plethora of public policy interventions affects the middle class is not at all well developed. The premise of this collection of papers is that for governments to sustain political support for cohesive national economic policies that are welfare enhancing, the interests of the middle of...

  4. 1 Overview: Fiscal Policy, Distribution, and the Middle Class
    (pp. 1-23)

    The economics of distribution has long dominated economic policy debates. The issue of income distribution in rich countries has centered on the question of who gains from public expenditures and who pays for them. In the United States, this discourse was aided analytically by the path-breaking work of Joseph Pechman more than thirty years ago.¹ His research at the Brookings Institution helped us understand not only who benefited from what kind of expenditure but also how they stacked up when aggregated across expenditure categories. Work on fiscal incidence has long been a central part of the economic policy debate as...

  5. 2 Stylized Facts on the Middle Class and the Development Process
    (pp. 24-53)

    The traditional concern of economists working on development policy has been the poor. The analysis of broader social structures and social classes, such as the middle class and the rich, is more the staple of work of sociologists and political scientists. However, this is starting to change. Economists are looking at the middle class as a source of entrepreneurship, consumer power, and social stability. These propositions, of course, need empirical verification.

    As income per capita increases, people leave poverty and enter the pool of what we call the middle class. In the last two decades or so, this process has...

  6. 3 The Future of Global Income Inequality
    (pp. 54-74)

    With the increasing pace at which domestic markets are becoming integrated into the global economy, the debate on income disparities around the world has intensified. An interesting side effect of globalization has been the change of the benchmark against which people measure their own well-being. Increased international trade flows, greater exposure to international travel, and improved and cheaper communication all have made it easier to assess one’s well-being within an international context. These phenomena are giving more relevance to the concept of global income distribution.¹ The common understanding is that the recent globalization process has exacerbated inequalities between rich and...

  7. 4 The Scope and Limits of Subsidies
    (pp. 75-96)

    Subsidies are a potentially powerful tool to address concerns about income redistribution when the design of tax systems is ineffective and politically too difficult to alter to achieve fairness. The ability to target subsidies also makes them a potentially effective instrument to correct market failures. Because they are relatively low-cost instruments that can be used to support a wide range of targeted political objectives, subsidies pervade almost all dimensions of our lives. The obvious subsidies are the ones that make the newspapers and generate large public protests such as agriculture, fuel, transport, but there are many more than those making...

  8. 5 Policies for Lower Global Wealth Inequality
    (pp. 97-124)

    This chapter is concerned with household wealth, wherewealthis used in a strict sense to refer to net worth or the value of assets minus liabilities. Wealth in this sense is one of the central determinants of material welfare, along with income and consumption. Its separate importance has long been recognized by economists and others, but historically data on wealth were less complete than for other indicators. That situation is changing, and there is increasing evidence of the significance of wealth for household well-being.¹

    Recently, along with Susanna Sandström, Anthony Shorrocks, and Edward Wolff, I provided a first estimate...

  9. 6 Can Happiness Research Help Fiscal Policy?
    (pp. 125-154)

    Economists have increasingly been questioning the extent to which traditional measures of utility and welfare that are based on income and consumption fully capture important elements of individual welfare. At the same time, behavioral economists have been using experiments and other tools to explore how individuals depart from standard notions of rationality and welfare maximization. An outgrowth of these developments has been the new interest in happiness surveys as a tool for measuring welfare and well-being.

    This chapter explores the extent to which happiness surveys can shed light on the seeming disconnect between the record of policy reforms (at least...

  10. 7 The Politics of Effective and Sustainable Redistribution
    (pp. 155-188)

    One of the primary activities of states around the world is to provide public policies aimed at protecting citizens from falling into poverty and providing assistance to those individuals who have already fallen victim to risk. The nature and scope of redistributive policies vary across countries and regions, as do the political sustainability of and popular support for the programs. Research on social protection in advanced industrialized democracies has found that the (Nordic) social democratic and, to a lesser extent, (continental) Christian democratic welfare states are very effective at reducing poverty and income inequality. By contrast, the Anglo-American liberal welfare...

  11. Contributors
    (pp. 189-190)
  12. Index
    (pp. 191-200)