Who will drive consumer spending in the next decade?

By Kristofer Hamel, Chief Operating Officer, World Data Lab, and Homi Kharas, Interim Vice President, Brookings; Senior Economic Advisor World Data Lab1 

shoppingIn October 2018, the international community crossed a historic threshold: the majority of humanity no longer lives in or near poverty. Now and continuing into the foreseeable future, most people on Earth are middle class or rich. This tipping point is of interest to both the research community as well as global and regional companies searching for new markets.

But who exactly are these new middle-class consumers, and how will their profile change over the next decade?

Answering this question begins with an understanding of household classifications. Our projections (all per person spending according to 2011 purchasing power parity) designate households as those in extreme poverty (households spending below USD 1.90 per day), those in the lower middle class (households spending USD 11-50 per day) and those in the upper middle class (households spending USD 50-110 per day). Two other groups –households “vulnerable” to falling back into poverty as well as the “rich” who sit at the top end of the distribution – round out our classifications.
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On Deaton and development: consumption, poverty and well-being

By Marcelo Neri, Director of FGV Social, Professor at EPGE-Fundação Getulio Vargas, Former Brazilian Minister of Strategic Affairs, Executive Secretary of the CDES Council for Economic and  Social Development and President of Ipea Institute for Applied Economic Research

The Royal Sweden Academy of Sciences titled Angus Deaton’s Nobel prize “Consumption, Poverty and Welfare.” The evaluation commission organised Deaton’s scientific contributions during the last 40 years under three headings: i) demand models for groups of consumption expenditures, such as food, housing, etc., that already had earned  his mentor, Sir Richard Stone (1913-1991), a Nobel in 1984; ii) the study of the choice between consumption and saving, which was the object of the prizes awarded to Franco Modigliani (1918-2003) in 1985 and Milton Friedman (1912-2006) in 1976; and iii) studies about “poverty” and “welfare” that already had conferred Amartya Sen with a Nobel in 1998. I would include a fourth element of Deaton’s work, not cited by the commission, on “subjective indicators and well-being” for which Daniel Kahneman earned a Nobel in 2002.

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Social protection: Worldwide priority, local solutions

By Alexandre Kolev, Head of the social cohesion unit at the OECD Development Centre

The past decades have seen the dramatic expansion of social protection programmes in developing countries. Today, about 2 billion people in developing countries have access to social safety net programmes. Virtually all countries, even some in fragile contexts, have interventions in place that aim to address consumption deficits, and some middle income countries, especially in Latin America, have introduced cash transfers to encourage human capital development. Conditional cash transfers now exist in 64 countries, a dramatic increase from 2 countries in 1997 and 27 in 2008.

The recent rise in social protection has been fuelled by overwhelming evidence that social protection schemes deliver real results. Numerous evaluations around the world — 86 alone between 2011 and 2015 — show positive impacts, including a reduction in poverty by 50% for the most successful cases, increased household income and consumption, better health and education, and increased investment in productive assets and savings. Continue reading