Do economic recessions ‘squeeze the middle-class’?

Batinti, Alberto and Costa-Font, Joan ORCID: 0000-0001-7174-7919 (2019) Do economic recessions ‘squeeze the middle-class’? Economics and Politics. ISSN 0954-1985

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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.

Item Type:	Article
Official URL:	https://www.wiley.com/en-gb/Economics+&+Politics-p...
Additional Information:	© 2019 John Wiley & Sons Ltd
Divisions:	Health Policy
Subjects:	H Social Sciences > HC Economic History and Conditions
JEL classification:	F - International Economics > F2 - International Factor Movements and International Business > F22 - International Migration I - Health, Education, and Welfare > I3 - Welfare and Poverty > I30 - General J - Labor and Demographic Economics > J6 - Mobility, Unemployment, and Vacancies > J64 - Unemployment: Models, Duration, Incidence, and Job Search
Date Deposited:	03 Jun 2019 15:15
Last Modified:	16 Apr 2024 07:06
URI:	http://eprints.lse.ac.uk/id/eprint/100930

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