How Does the Middle-Class Share Affect Growth and Distribution in a Three-Class Economy?

Sasaki, Hiroaki and Pham, Thu Giang Huong (2025): How Does the Middle-Class Share Affect Growth and Distribution in a Three-Class Economy?

Abstract

This study presents a three-class economy model (workers, middle class, and capitalists) and investigates how the middle-class share evolves over time. It also examines the relationship between the middle-class share and economic growth. Depending on the parameters and initial conditions, three different long-run situations arise: (i) an Anti-Dual equilibrium, in which workers and capitalists coexist while the middle class vanishes; (ii) a Pasinetti equilibrium, in which all three classes coexist; and (iii) a Dual equilibrium, in which workers and the middle class coexist while capitalists vanish. An expanding middle-class share either increases or decreases economic growth depending on the conditions.

• Item Type: MPRA Paper
• Language: English
• Keywords: classical growth model; middle class; income distribution
• Subjects: E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E24 - Employment ; Unemployment ; Wages ; Intergenerational Income Distribution ; Aggregate Human Capital ; Aggregate Labor Productivity; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E25 - Aggregate Factor Income Distribution; E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E32 - Business Fluctuations ; Cycles

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