very important in light of the reasons outlined in a large literature arguing that size and composition of the middle class is critical for strengthening and stabilizing the democratic system and its institutions, for a better economy‘s performance, and for social cohesion. Moreover, while our definition follows a vulnerability-to-poverty approach and empirically establishes a new lower threshold for middle class identification, other existing definitions have tried to answer the question of what income level to choose for middle class measurement, as discussed above. We contrast these definitions with our proposed range and found that the middle class has increased in Chile, Mexico and Peru during the period under study, contrary to the results presented from the application of the Ravallion and B&D methods (shown previously: see figures 1-2).

The divergences are rather evident: the absolute lower threshold defined by Ravallion and B&D ($2 a day) is a very low standard for middle class comparisons across the upper-middle income countries analyzed in this paper. Actually, the official poverty lines in all three countries are more than twice the $2 threshold, suggesting thus the inclusion of poor households as part of the middle class (see Kernel distributions in annex; figure A2). The latter implies that the decrease in the size of the middle class, according to B&D and Ravallion definitions, was motivated by the fact that a proportion of households climb out of poverty during the analyzed period: in Chile from 32.9 to 15.1 percent over 1992-2009; in Mexico from 23.1 to 20.1 percent over 1992-2008; and in Peru from 21.6 to 19.6 percent over 1997-2009. The vulnerability-to-poverty measure of middle class proposed in this paper corrects these trends.

# **7. Concluding remarks**

This paper proposes an empirical methodology to analyze the middle class based on the notion of vulnerability to poverty. Following a regression-based approach this paper exploits panel data to estimate the amount of comparable income –$10 dollars a day, associated with a low (0.10) probability of falling into poverty— which depicts the beginning of the middle class (lower threshold). In the case of the upper threshold it is established at $50 dollars a day. By doing so, this paper proposes an absolute-standard definition of the middle class as those households living with a per capita income of $10-50 a day at 2005 PPP. These thresholds are then used in cross-sectional surveys to measure the size of the middle class in Chile over 19922009, in Mexico over 1992-2008, and in Peru over 1997-2009.

Following this definition, this paper overcomes the two main shortcomings that emerge when comparing middle classes across countries using existing measures. First, relative measures face the problem of different income or consumption distributions from one country to another, and thus they compare different middle classes. Second, the use of very low absolute thresholds in upper-middle income countries, such as Chile, Mexico and Peru, includes a high proportion of poor households within the middle class definition. This sheds light on the descriptive analysis that emerges from the use of monetary thresholds without a conceptual framework. Overall, this paper makes two important contributions to the measurement of the middle class. First, methodologically, it ensures that no lower class or poor

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