Do economic recessions ‘squeeze the middle-class’?

Alberto Batinti and Joan Costa-Font

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: We examine whether economic downturns are linked to the distribution of population income giving rise to an observed “middle class squeeze.” We test this hypothesis using a novel and unique dataset using the Luxembourg Income Study (LIS) and allowing us to construct alternative definitions of middle class, such as income-based measures, including labor income based, and perceived measures from the Integrated Values Study (IVS). Our findings suggest that, although recessions are not consistently correlated with middle class squeeze overall, the more unanticipated shocks resulting from the Great Recession show consistently through several definitions, a negative and robust conditional correlation. Furthermore, we find that recessions are positively correlated with 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 size; economic recessions; employment shocks; income distribution. (search for similar items in EconPapers)
JEL-codes: F22 I30 J64 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2019-09-26
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Published in Economics and Politics, 26, September, 2019. ISSN: 0954-1985

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http://eprints.lse.ac.uk/100930/ Open access version. (application/pdf)

Related works:
Journal Article: Do economic recessions “squeeze the middle class”? (2020)
Working Paper: Do Economic Recessions ‘Squeeze the Middle-Class’? (2019)
Working Paper: Do Economic Recessions ‘Squeeze the Middle-Class’? (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:100930

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