The effect of spatial distribution on the composition of the middle social class in the Kingdom of Saudi Arabia: A spatial econometric analysis

This article examines the formation of the Saudi middle class using econometric models and a national survey of household budget and consumption data from 44,000 households in 2019. The study compares the spatial offset model (SAR) and spatial error model (SEM) with the Space Turbine Model (SDM) and Space Turbine Error Model (SDEM), finding that the SDM and SDEM models offer better benefits and options. The SDEM model exhibits the best-fit quality based on the Akaike information criterion. The results reveal a positive spatial effect indicating that human capital accumulation is vital in knowledge diffusion and technological transfer. The study also identifies spatial inequalities in the distribution of the middle class, with a concentration in urban areas like Riyadh and the Eastern Province. While the poor class is concentrated in rural areas which surround the main cities such (e.g., Rumah, Tawala, Hanak, Araar and Aljof) while the wealthy class is concentrated in urban areas, particularly Riyadh. The article emphasizes the importance of regional development and suggests measures to reduce inequality and enhance the middle class's role in the economy. In effect, the Saudi government should increase access to quality education and training by investing in the education system to provide citizens with the skills needed for a modern economy, including higher education, vocational training, and apprenticeships. Nevertheless, the Kingdom should promote entrepreneurship by creating an environment that encourages entrepreneurship and supports small business growth through tax incentives, access to capital, and start-up support. Moreover, the most important is improving access to finance by making it easier for businesses, especially small ones, to access finance through loan guarantees and support programs.