Anchoring Measurement Of The Middle-Income Class To Subjective Evaluation

What constitutes the middle class is hotly debated. Following an income-based approach, a main issue concerns how to fix the income boundaries that define the middle-income tier. This paper offers a novel model-based approach to the use of self-reported class evaluation for identifying those boundaries. The self-declared status responses are modeled using a non-conventional parametrization of an ordered logistic model. In this parametrization, the cut-points of the model are directly interpretable as income boundaries, and the variance of the errors captures the idiosyncratic heterogeneity of the outcome variable. The use of subjective data is exemplified in the estimation of the middle class in Kazakhstan over the period 2003-2015.