No abstract

Social funds and decentralisation : optimal institutional designOriginally published in Public administration and development, 26 (4

Rapid middle-income growth over the past decades has led to increasing public interest in the developing world’s “new middle classes”. However, these transformations have received less attention in the comparative democratization and welfare-state regime literature. In this review article, we aim to fill this gap by identifying emerging evidence and new directions for research about the social and political consequences of lower-middle income growth. We note that, while socio-cultural and political transformations traditionally associated with expanding middle classes are unlikely to materialize at current levels of socio-economic wellbeing in most developing countries, new pressures for reform may arise out of demands to better protect modest increases in private assets and from improved educational outcomes among lower-middle income groups. We also identify signs of increased distributional conflicts between economically vulnerable lower-middle income groups and more-affluent middle classes that may undermine the transition to stable democracy and more inclusive social policy systems.

The rapid decrease in absolute poverty across the developing world has received much attention. However, there have been few systematic attempts to analyse the political consequences of these developments. This article builds on the improved availability of household income data from developing countries to document a small but statistically significant impact of lagged poverty rates on a range of democracy indicators. The results hold across a battery of sensitivity and robustness tests. I also show that poverty reduction has a stronger effect on democracy than alternative predictors that are more widely used in the democratic regime transition and consolidation literature, such as average income and relative inequality (the Gini index). However, I find weaker effects of poverty on indicators of government quality and a declining influence of poverty reduction on democracy over time.These results point to more structural obstacles to democratic consolidation in lower-income regions, such as a tendency by populist leaders to exploit the economic grievances of vulnerable lower-middle classes.

Recent studies have endorsed asset-based approaches as a strategy for attaining the Millennium Development Goals. This article discusses asset indices as a diagnostic tool for these policies, systematically breaking them down into separate dimensions of private household wealth and basic publicgoods access and discussing how shortfalls in public-goods supply can be related to deprivations in basic human capabilities under the asset framework. It then illustrates how asset indices can be used for the targeting of public infrastructure investments and private asset-accumulation policies, with the help of a detailed case study of deprivations in household wealth and publicservice supply in Madagascar.