Sizing Up the Middle Class in Developing Countries

Abstract

In an effort to determine the number and economic power of individuals who have the ability to use institutional-quality real estate, the authors develop a methodology to estimate the size of the middle class and its economic productivity in developing countries. The authors’ model employs a long-tailed Pareto distribution to estimate the dispersion of wealth and productivity in each country included in the study—Brazil, China, India, Mexico, Russia, and Turkey. The model uses readily available secondary data, namely, GDP per capita and the Gini coefficient, in conjunction with a user-defined global threshold income level to define middle class. The methodology is general enough to be applied to any developing country and any threshold definition.

TOPICS: Real estate, factor-based models, analysis of individual factors/risk premia, global