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Do Economic Recessions ‘Squeeze the Middle-Class’?

Alberto Batinti () and Joan Costa-i-Font

No 6673, CESifo Working Paper Series from CESifo Group Munich

Abstract: We examine whether economic downturns reshape the distribution of population income giving rise to a “middle-class squeeze.” We test this hypothesis using alternative definitions of middle-class, such as income-based measures from the Luxembourg Income Study (LIS), and perceived measures from the Integrated Values Study (IVS). Our findings suggest that, although recessions do not produce a middle-class squeeze overall, the unanticipated shocks resulting from the Great Recession did. Furthermore, we find that recessions increase the share of the population that regards itself as ‘middle-class.’ Estimates are heterogeneous to the baseline unemployment at the time of a recession, country spending on social protection, to middle-class measures and definitions.

Keywords: middle-class; Great Recession; LIS & IVS data; employment shocks; income distribution; social insurance (search for similar items in EconPapers)
JEL-codes: F22 I30 J64 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eur, nep-lab and nep-ltv
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_6673

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