The Economic Lives of the Poor

Abhijit Banerjee and Esther Duflo. Journal of Economic Perspectives, Winter 2007, 21(1): 141-167.

Banerjee and Duflo examine the factors that distinguish individuals who have had some success at wealth creation (the middle class) from those who have not (the lower class). The authors find many similarities between the middle class and the poor. They find, for example, that businesses run by middle class families do not look substantially different than those run by poor families. But, more favorable employment arrangements allow middle class families to accumulate wealth and, in turn, invest it into human capital through healthcare and education.