 Perceptions of inequalityEuropean Journal of Political Economy, 2020, vol. 65, issue C Abstract: Individual perceptions of (income or wealth) inequality have strong effects on their decisions as economic agents or voters. It is therefore important to know more about the relation between perceived and measured inequality. We present a novel formal framework that is based on the assumption that people typically do not observe the entire income (wealth) distribution and that their guesses about the extent of inequality are based on “self-centered” reference groups. This framework predicts that perceptions of inequality will change along positions in the income distribution and that for a specific position various dimensions of inequality perception are related to each other. First, low (high) income individuals overestimate (underestimate) their own position. Second, subjective estimates of average earnings increase with the own income position. Third, high or low income people have different perceptions about the skewness and the “shape” of the income distribution (e.g. pyramid or diamond). Fourth, the subjective perception of inequality is lower for high-income individuals. Survey data from 40 countries provide strong support for the framework. Keywords: Income distribution; Perception of inequality; Reference groups (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:poleco:v:65:y:2020:i:c:s0176268020300756 DOI: 10.1016/j.ejpoleco.2020.101927 Access Statistics for this article European Journal of Political Economy is currently edited by J. De Haan, A. L. Hillman and H. W. Ursprung More articles in European Journal of Political Economy from Elsevier |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.