The middle class: An analysis of the dependence of size on the level of income inequality

Abstract

The article examines the dependence of the middle class size on the level of income inequality. For this purpose, the indicators that characterize the size of the middle class (the share of income of the middle class as a whole and the shares of its different strata) are analyzed. For this the analytical expressions were used which were found using the income distribution model based on the finite functional sequence that was developed by the author and described earlier in several articles. The results obtained in the work show a certain stability of the income share of the middle class as a whole in a rather wide range of the level of income inequality. At the same time, it is shown that there are significant differences in the dependence of the income shares of various middle class strata on the level of inequality. With the help of analytical expressions obtained on the basis of the developed model, a diagram is constructed for an approximate assessment of the middle class size depending on the level of income inequality. This diagram allows to estimate the size of the middle class for its various definitions in relation to the median income. Based on the results obtained, some variants of the possible reaction of the middle class as a whole and its individual strata to the increase in income inequality were considered. It is concluded that the middle class, being a source of stability, at the same time can become the initiator of the income inequality reduction when the inequality level is very high.