Date of Award

6-2011

Document Type

Open Access

Degree Name

Bachelor of Arts

Department

Economics

First Advisor

Eshragh Motahar

Language

English

Keywords

class, politics, economics, growth, GDP, regression

Abstract

Middle class individuals play a fundamental role in countries’ political and economic spheres. Their political demands for a fair tax system and public goods provisions enhance positive economic performance and development. A large share of income held by the middle class, according to Easterly (2001), is positively related to economic growth and political stability. Similarly, Alesina and Rodrik (1994) –among other political economic studies- highlight that a well-endowed median voter population influences the implementation of growth-enhancing economic policies. This study examines the interplay between political competition and a politically active middle-class and its subsequent effect on economic growth. The dependant variables are real GDP per capita growth rate and GDP per capita in its logarithmic form. Middle class is defined as the median voter population represented by the third and fourth quintiles in income distribution. Political Competition is defined under the variable “Political Competitiveness” of the Polity IV Project. Cross-sectional regression analyses are carried in the periods 1980-1994 and 1995-2009. This study’s empirical results find a dichotomous effect of political competition on middle class’ economic performance. On the one hand, a politically active middle class positively influences economic growth. On the other hand, political competition’s suppression is positively related to economic growth. Analysis and comparisons of case studies in Latin America and East Asia shed additional light on regression results and provide grounds for the design of potential economic policies.

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