We reexamine the association between poverty, the middle class, and institutional outcomes using a newly developed cross-country panel dataset containing detailed information on the distribution of income and expenditure. When the size of the middle class increases (measured as the proportion of...

This paper studies how initial conditions affect the outcome of reform using the case of trade liberalization as an example. The paper illustrates empirically and theoretically the seemingly paradoxical case of larger impact of reform when initial conditions are poorer.