Report

The Emerging Middle Class in Developing Countries

Homi Kharas

Editor’s Note: The middle class has played a special role in economic thought for centuries and new focus is being place on the importance of middle class consumption. In an OECD Development Centre Working Paper, Homi Kharas examines whether or not Asia’s emerging middle class will be large enough to replace the U.S. as a driver of the global economy.

Abstract

The shift in global goods production towards Asia is well documented. But global consumer demand has so far been concentrated in the rich economies of the OECD. Will that also shift towards Asia as these countries get richer? This paper defines a global middle class as all those living in households with daily per capita incomes of between USD10 and USD100 in PPP terms. By combining household survey data with growth projections for 145 countries, it shows that Asia accounts for less than one-quarter of today’s middle class. By 2020, that share could double. More than half the world’s middle class could be in Asia and Asian consumers could account for over 40 per cent of global middle class consumption. This is because a large mass of Asian households have incomes today that position them just below the global middle class threshold and so increasingly large numbers of Asians are expected to become middle class in the next ten years. The paper explores how this can help sustain global growth in the medium term, driven by product differentiation, branding and marketing in the new growth markets of Asia.

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