Antonio Estache and Danny Leipziger have collected a number of important analyses on the distributive consequences of fiscal policies for the economic fortune of the middle class. Although analyzing different dimensions of this problem, the chapters of this book share two characteristics. First, they all implicitly assume that if we want to enhance the welfare of people in developed and developing nations, we have to explicitly focus on the middle class. Second, methodologically, they all are grounded on sound distributional analysis.

The editors provide a compelling motivation for the main aim of the book, namely the analysis of the distributional implications of fiscal policies for the middle classes. The economic welfare of the middle classes has a number of positive features for society as a whole. In particular, in developing countries, the middle classes may provide the newly established democratic regimes with stability. In addition to market reforms, many developing countries have adopted democratic regimes. If the middle classes do not improve their welfare, this may fuel their discontent with democracy. Similarly, their support to welfare-enhancing trade policies is dependent on the benefits that they obtain. More importantly, when the middle class is benefited by fiscal policies, the poor may be better off at the same time. In other words, the benefit of the middle classes need not be at the expense of the improvement of the welfare of the poor. The editors of the book, Estache and Leipziger, rightly cite the ‘paradox of redistribution’ formulated by Korpi and Palme (Reference Korpi and Palme1998) in support of their argument.

After the overview provided by the editors, the second chapter by Andres Solimano maps out the distributional consequences of the development process for different income classes across different regions of the world. This chapter provides invaluable information and makes a compelling argument in support of the general objective of the book, since it identifies that the middle class is crucial for achieving sustainable economic development.

If there was any doubt about the relevance of the aim this book, the third chapter by Bussolo, De Hoyos and Medvedev eliminates it. Their projections on the extent of world inequality show that the share of the ‘middle class’ in the world population, under current policies, will very likely more than double in 20 years.

The fourth chapter by Goldstein and Estache analyses a very common policy tool used in developing countries: subsidies. They show that many of these subsidies are regressive, and provide a political-economy analysis of how to target subsidies in order to benefit the poor and at the same time secure the necessary political support from the middle class.

The fifth chapter by Davies provides a new perspective in the analysis of inequality and fiscal policies and makes a twofold contribution. This new perspective consists of the analysis of wealth rather than income inequality. Wealth provides a much more solid foundation to secure living standards. However, mainly because of the lack of available data, most of the analyses on inequality assess the distribution of income and not that of wealth. Furthermore, this chapter evaluates different policies to promote the accumulation of wealth by the middle classes in developing countries.

The sixth chapter by Graham reminds us that ultimately the objective of public policies is not to increase the income but the welfare and well-being of citizens. For this reason, surveys on happiness may provide a useful tool to measure them. However, although these data have gained more popularity recently, Graham provides compelling economic arguments to warn against their use in the distributional analysis of fiscal policies.

The last chapter by Hubber, Pribble and Stephens analyses two related questions: what social policies are more effective at reducing poverty and increasing educational standards of the population, and how can we develop cross social classes coalitions to secure political support for those policies. Their analysis combines the insights gained from the experience of developed countries and an assessment of different policies in the light of the class structure of Latin American countries.

There are three particular features of this book that make it very relevant to social scientists. Firstly, it is analytical. The chapters of the book share a concern with an analysis of the distributive consequences of government policies. Sound distributional analysis is the common analytical tool used by the authors of the book to analyze subsidies, policies to promote wealth building, happiness, and the political support given by different income classes to policies. Secondly, it provides a political economy account of the sustainability of policies. This second feature is related to the previous one. Only if we identify the winners and losers of fiscal redistribution will we be able to predict the political support provided by different income classes to fiscal policies. In democracies, governments need to gain electoral support and this normally requires building coalitions between different income classes. Thirdly, this book provides analyses of the experience of developed and developing countries. This is a significant contribution. Thanks to the availability of comparable micro data provided by the Luxembourg Income Study, we have a rather large body of empirical work analyzing the redistribution effected by welfare states of developed countries. However, for developing countries, due to the lack of reliable cross-country comparable data, our knowledge is much more limited. The authors make the most of available data for developing countries and provide us with valuable information on a number of distributive issues, including among others the distribution of income classes in the development process and the level of global income and wealth inequality. As a side contribution, newcomers to the analysis of inequality in developing countries learn about the data sources available thanks to the different empirical analyses in this book.