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AbstractPost Keynesian economics has mainly focused on macroeconomic issues and ignored microeconomic policy issues. This paper begins to remedy this gap. It outlines the main principles of the Post Keynesian approach, distinguishes them from neoclassical economics, explains how these principles can be applied to microeconomic issues, and then draws out some policy implications that differ markedly from neoclassical theory on the issues of health care and productivity growth.

<div>En este artículo se utiliza el Estudio de Luxemburgo sobre Ingresos (ELI) para analizar la dimensión de la clase media en varios países latinoamericanos. Uno de los principales</div><div>hallazgos es que a mediados de la primera década de este siglo, el tamaño de la clase media en América Latina no parecía depender de factores demográficos. Un segundo hallazgo es que, en contraste con la mayor parte de los países desarrollados, las políticas gubernamentales de impuestos y gastos influyen poco en el aumento del tamaño de la clase media en los países latinoamericanos de la muestra. Por último, al igual que en el mundo desarrollado, los factores del mercado laboral no ejercen gran efecto en el tamaño de la clase media en Latinoamérica, siendo las principales excepciones Brasil y México, donde el empleo parece incrementar el tamaño de la clase media.</div><div>Palabras clave: Clase media, distribución del ingreso, Estudio de Luxemburgo sobre el Ingreso (ELI), Latinoamérica, política de impuestos y gastos.</div>

This study uses the Luxembourg Income Study to examine the size of the middle class across several less developed American nations. One main finding is that in the mid 2000s the size of the middle class in Latin America does not seem to depend on demographic factors. A second finding is that, in contrast to most developed nations, government tax and spending policies do little to increase the size of the middle class in less developed America. Finally, as in the developed world, labor market factors do not have much impact the size of the middle class in Latin America. The main exceptions here seem to be Brazil and Mexico, where employment appears to increase the size of the middle class.

This paper updates and extends my earlier work, published in the Journal of Economic Issues, on how the middle class fares throughout the world. My 2007 paper provided a definition of the middle class as well as estimates of the size of the middle class in several nations. It argued that the fraction of households that are middle class across nations and over time is mainly determined by government tax and spending policies. The more progressive the national tax system, and the more generous government spending programs, the larger is the proportion of middle-class households. This empirical work on the middle class was done using the Luxembourg Income Study (LIS), an international database containing extensive income as well as socio-demographic information. LIS databases center around particular years, called 'waves'. Each wave is around 5 years apart, with Wave #1 beginning in the early 1980s. For my previous research, data was available only up Wave #5 (around 2000), and Wave #5 data was unavailable for some countries. More Wave #5 data is available, and some data for Wave #6, centered around 2004, has come online recently. This provides an opportunity to assess what has happened to inequality and the size of the middle class in the early 2000s. In addition, my earlier work focused only on aggregate tax and spending by governments; it did not look at specific policies and how these promoted a middle class in different nations. This paper focuses on three specific sorts of national spending policy that assist households and affect the size of the middle class across nations and over time. First, there are policies that aid the unemployed and disabled. Second, there are retirement programs that provide income to older households. Third, there are policies that assist families with children (child or family allowances, family leave policies and child support payments). It examines the extent to which each of these policies increased the size of the middle class in the early 2000s, the impact of the set of these three policies on the middle class in the early 2000s, as well as other possible determinants of the size of the middle class in the 2000s.

This paper updates and extends my earlier work (published in the June 2007 issue of the Journal of Economic Issues on how the middle class fares throughout the world. Wave #6 data from the Luxembourg Income Study, recently released and centered around 2004, provides an opportunity to assess what has happened to the size of the middle class around the world in the early 2000s. In contrast to the 1980s and 1990s, there was no noticeable decline in the middle class during the early 2000s. The paper provides further evidence that the size of the middle class in each nation depends mainly on government tax and spending policies. In particular, it shows the key role played by family allowances and paid family leave in supporting a national middle class.