Middle Class as a Stabilized Dynamic System in Economy

Abstract

We used elements of the qualitative theory of differential equations, sometimes called “catastrophe theory”, to justify the distribution of income. Within the framework of the proposed model, the concept of “middle class” receives a strict, non-descriptive definition. According to the model, the middle class exists near an equilibrium, but unstable state of the balance of income and costs. The interaction of the middle class and consumer credit makes it possible to explain the reasons for the “great recession” of 2007–2008 and the observed “Squeeze” of the middle class in economically developed countries.