Abstract
A solid middle class can provide the backbone for more stable societies and sustained welfare. Ecuador’s experience, alike that witnessed elsewhere in LA, has yet to reach that footing. This chapter analyzes the roots of the stark decline of poverty and the commensurate rise of an emerging middle class in Ecuador. These trends happened on the back of a strong rise in real wages and active social policies supported in part by booming international commodity prices. Not being rooted in sustained aggregate productivity growth and structural change towards modern services and industries, the size of the middle class and its welfare are still highly vulnerable to global market volatility.
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Notes
- 1.
The high dollar inflation was the result of setting a sucre-dollar conversion rate at a level much higher than the peak market exchange rate before dollarization and failure to introduce enough small-denomination dollar coins, which pushed up prices for many basic products (by rounding to one dollar). See Vos (2000).
- 2.
Please note that the size of the upper middle-income and rich household group in Ecuador is probably strongly underestimated because of under-reporting of incomes by those households in the household surveys used for the present analysis.
- 3.
The results presented in this chapter are based on a new and robust procedure to reconstruct series of poverty and income distribution data for the labor force surveys conducted in Ecuador since 1990. The surveys have gone through several methodological changes in questionnaire design and sampling. Also, the dollarization of the economy in 2000 poses problems in proper deflating nominal incomes for the currency change. The set of deflators for national and international poverty lines used to construct the time-consistent poverty and real income estimates are available from the authors upon request.
- 4.
The results on mobility presented in this chapter follow the same procedure as the study of Pesantez (2014), which also estimates transition matrices based on Ecuador’s labor force surveys, but covers the period 2007–2013.
- 5.
- 6.
- 7.
See, for example, López Calva and Lustig (2010).
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Ponce, J., Vos, R., Rosero, J., Castillo, R. (2018). Is Latin America’s Rise of the Middle Classes Lasting or Temporary? Evidence from Ecuador. In: Vivares, E. (eds) Regionalism, Development and the Post-Commodities Boom in South America. International Political Economy Series. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-62551-5_2
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