 How does the middle class vanish? The importance of redistribution targetsEconomic Analysis and Policy, 2023, vol. 79, issue C, 560-568 Abstract: The aggregate income share of middle-class households is observed to be shrinking in some developed countries. The cause of the disappearance of the middle class needs further investigation. We are aware of Piketty’s hypothesis that inequality increases if the rate of return on capital exceeds the economic growth rate. However, increasing inequality is not identical to the vanishing middle class, and the macroeconomic mechanism for the latter is yet to be investigated. This study analyses the mechanism by which the middle class vanishes by constructing a wealth-in-the-utility-function model. Our findings are as follows: (1) If a modified Piketty condition is combined with a lower-class targeted redistribution, the middle class vanishes through the vicious cycle of expansion of the lower class and increasing taxes. (2) An institutional conversion to a universal redistribution can prevent the middle class from vanishing, even if the modified Piketty condition holds. Keywords: Middle class; Polarization; Piketty; Inequality; Redistribution (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecanpo:v:79:y:2023:i:c:p:560-568 DOI: 10.1016/j.eap.2023.06.033 Access Statistics for this article Economic Analysis and Policy is currently edited by Clevo Wilson More articles in Economic Analysis and Policy from Elsevier |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.