Our Transportation Infrastructure is Crumbling

Cars and the Middle Class in Developing Nations

May 26, 2012 • Demand, Supply, and Markets, Developing Economies, Economic Debates, Households, Uncategorized • 199 Views    No Comments

What does it mean to be middle class?

For a developing nation like China, income might be the key. If someone earns between $10 and $50 a day, then that person is middle class. Or perhaps you just need to be able to buy a tall macchiato at a Starbucks or a shreddded pork and seaweed doughnut at Dunkin’ Donuts. Or maybe it just means owning a cell phone or eating meat regularly.

I’ve been reading about how economists have been trying to identify the most accurate and simple way to identify the growing middle class in the developing world. One answer that made a lot of sense is “cars.”

Car registration data indicate that car ownership is soaring in many developing nations. The BRICs (Brazil, Russia, India, China) alone added 14 million cars in 2010. In China for 2010, 27 percent of all cars on the road were new registrations. If we use car ownership to estimate the size of the middle class in China, that takes us to 34.4 million passenger cars per household (averaging 3.1 people) and 106.6 individuals that might be called middle class.

Why look at the middle class? Because the middle class has been an economic growth engine, fueling small business formation, consumer spending, and market activities.

One interesting fact: There are 451 passenger vehicles per 1000 people in US while in China, the number is 27 per 1000 and for India, 10.

This Foreign Policy article is a good source for ideas that define the middle class and my car data, and then, if you want something more academic, you could continue with this OECD study. For a quick picture of the size of the middle class in different countries, this chart from The Economist is ideal.

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