Resource information
Modern political economy stresses
"society's polarization" as a determinant of
development outcomes. Among the most common dorms of social
conflict are class polarization, and ethnic polarization. A
middle class consensus is defined as a high share of income
for the middle class and a low degree of ethnic
polarization. A middle class consensus distinguishes
development successes from failures. A theoretical model
shows how groups - distinguished by class or ethnicity -
will under-invest in human capital and infrastructure when
there is "leakage" to another group. The author
links the existence of a middle class consensus to exogenous
country characteristics, such as resource endowments, along
the lines of the provocative thesis of Engerman and Sokoloff
(1997), that tropical commodity exporters are more unequal
than other societies. The author confirms this hypothesis
with cross-country data. This makes it possible to use
resource endowments as instruments for inequality. A higher
share of income for the middle class and lower ethnic
polarization, are empirically associated with higher income,
higher growth, more education, better health, better
infrastructure, better economic policies, less political
instability, less civil war (putting ethnic minorities at
risk), more social "modernization," and more democracy.
