in most values surveys. Income is in fact unavailable in the _Ecosocial_ survey, which contains however information on a series of household goods and assets. We use therefore information of households’ assets to construct a measure of households’ permanent income – the long-term level of economic wellbeing, purged from short-term volatility and measurement error (Torche 2009).

To do so, we match assets in _Ecosocial_ with assets from an “external” household survey in each country that contains information on both assets and households’ income.<sup>2</sup> Using these external surveys, we run a regression model predicting logged per capita household income by means of the set of household goods and assets, controlling for the household head’s education, and the log of household size. The coefficients obtained for the household goods and assets are then used in _Ecosocial_ to predict, using the same set of assets and household characteristics, (logged) per capita income for each household. This technique closely resembles the two-sample instrumental variable approach used to examine intergenerational income elasticity, when information on parental income is unavailable in the focal survey (Arellano and Meghir 1992, Angrist and Krueger 1992). To achieve comparability across countries, we convert each income variable in 2005 USD PPP terms.

Next, we use the permanent household income as a regressor in our models. We construct two alternative measures of social class from the values of predicted household income that we call _absolute_ and _relative_ measures of class. Absolute class is based on fixed monetary thresholds, and distinguishes four classes: lower class (households with a monthly per capita income below $4 in PPP terms), lower-middle class (households with an income between $4 and $10), middle class (households with an income between $10-$20), and upper-middle class (households with an income above $20). We refrain from introducing an upper class with income above $50 or $100 because of very few households earning these incomes in Latin America (typically, around two percent of the sample), which would question the representativity of our results. Relative social class is based on the polarization index developed by Duclos, Esteban and Ray (Duclos, Esteban and Ray 2004; Esteban, Gradin and Ray 2007). Following their approach, we distinguish three income groups such that income inequality within each group (the “identification”) is minimized, while income inequality across groups is maximized. We call these groups lower, middle, and upper class. Observe that, while the absolute definition of class is constant across countries, the relative class position is nationspecific and depends on the patterns of income distribution in each country. Observe, also, that

> 2 The selected surveys are: _Pesquisa Nacional de Amostragem Domiciliarios_ (PNAD) 2009 for Brazil, _Encuesta de Caracterizacion Socioeconomica_ (CASEN) 2009 for Chile, _Gran Encuesta Integrada de Hogares_ (GEIH) 2006 for Colombia, _Encuesta Nacional de Condiciones de Vida_ (ENCOVI) 2006 for Guatemala, _Encuesta Nacional de Ingreso y Gasto de los Hogares_ (ENIGH) 2008 for Mexico, and _Encuesta Nacional de Hogares_ (ENAHO) 2009 for Peru.

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