The Subjective Wealth Distribution: How it Arises and Why it Matters to Inform Policy?

Pirmin Fessler and Severin Rapp

No 3x4jh, SocArXiv from Center for Open Science

Abstract: We estimate the relationship between people’s biased perceptions of their rank in the wealth distribution and savings behavior. Using unique wealth survey data from Austria, we uncover a significant bias in self-assessed distributional ranks. Our estimates indicate that individuals who underestimate their wealth rank have a savings rate approximately 50% higher than those who assess their rank accurately. Preferences that feature relative wealth in the utility function can explain this relationship. Our findings inform contemporary macroeconomic models and contribute to understanding the impact of information bubbles on economic decisions. (Stone Center on Socio-Economic Inequality Working Paper)

Date: 2024-11-14
New Economics Papers: this item is included in nep-evo, nep-fdg and nep-upt
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Persistent link: https://EconPapers.repec.org/RePEc:osf:socarx:3x4jh

DOI: 10.31219/osf.io/3x4jh

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