The Role of Middle class in

Economic Growth in Iran

Soheila ParvinAllameh Tabatabaee University

Iran

The presentation is organized as : I: quick review of the applied literature on

the role of middle class in economic growth,

II: definition and measurement of middle class in experimental studies,

III: the econometric methodology,

IV: the empirical and remarkable findings for Iran.

( Homi Kharas and Geoffrey Gertz,2011,Wolfensohn Center for Development at Brookings)

Why Middle class is Important?A larger middle class means larger and more stable Demand (Solimano 2008)

Greater share of the revenue in the hand of this group means higher growth, better infrastructures ,better economic policy, improvement in health and education, and…(Easterly 2001).

Middle class is willing to pay for better quality of infrastructure, health and education (Banerjee Duflo 2008).

Middle class has an important role in capital formation (Zilibotti 2007).

Middle class through political actions asking institutional reforms therefore improves quality of government social policies. In the absence of large middle class a country with large inequality could have been decisive to the backwardness from the rest (Loaza, Rigolinni and Llorente 2012).

Economic growth with reduction of income inequality is appropriate policies against poverty, inflation and corruption ( Aguilar Dmedeiros 2004).

A strong middle class, as thinkers from Aristotle to James Madison to modern Political Scientists have pointed, fosters better government is well-run, increasing citizen participation, minimizing factional fighting, and promoting policies for the benefit of all society than special interests (David Madland 2011)

Why Middle class is Important?

A strong middle class, as thinkers from Aristotle to

James Madison to modern Political Scientists have

pointed, fosters better government is well-run,

increasing citizen participation, minimizing factional

fighting, and promoting policies for the benefit of all

society than special interests (David Madland 2011)

Industrialization has fixed costs. Because international

trade is costly, there must be a domestic market of a

certain size to overcome these costs. That only happens

if income is concentrated in a middle class. Too much

equality and income levels do not rise to a level which

can support the demand for manufactures.

).

Why Middle class is Important?

Middle class is not something to create through growth; it is the source of economic growth.

Why Middle class is Important?

Some characteristics of Income distribution in Iran

During last two decades poverty has been reduced

duo to:1- Government protection policies.

2- Existence successful charity institutes and NGO's,

3- Family protection,

4- Religious teachings that says everybody is responsible to help the poor.

Religious teachings that says everybody is responsible to help the

Some characteristics of Income distribution in Iran

Some characteristics of Income distribution in Iran

Some characteristics of Income distribution in Iran

Econometric Specification and Methodology

General form of basic equations

Dose middle class affect growth directly?

Dose middle class affect growth through labor force?

What Factors Affect the Size of the Middle Class?

What Factors Affect the Size of the Middle Class?