Understanding the Growth of the Middle Class in Bolivia

In this paper we aim to disentangle how sectoral economic growth affects the growth of the middle class size using state-level data of Bolivia from 2000 to 2017, a country with limited data, breaking the three main economic activities into subsectors aiming for more specific results. By means of a Bayesian hierarchical longitudinal model for small samples, we find that the commerce and services sectors have the biggest impact, even though mining and agriculture also have a positive effect on the increase of the middle class in Bolivia. Our results also suggest that both formality and public social investment have a significant, yet smaller, effect.