The middle class in macroeconomics and growth theory



Tom Palley models the role of the middle class in economic growth. From the abstract:
This paper presents a three class growth model with labor market conflict. The classes are workers, a middle management middle class, and a “top” management capitalist class. The model introduces personal income distribution that supplements conventional concerns with functional income distribution. Endogenously generated changes in personal income distribution can generate endogenous shifts from profit-led to wage-led regimes and vice-versa. A three class economy generates richer patterns of class conflict because the middle class has shared interests and conflicts with both capitalists and workers. Changes that benefit the middle class do not necessarily increase growth or employment or benefit workers.
The full paper is available here.

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