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Biased Perceptions of Income Distribution and Preferences for Redistribution: Evidence from a Survey Experiment

Guillermo Cruces, Ricardo Perez Truglia () and Martin Tetaz
Additional contact information
Ricardo Perez Truglia: Harvard University
Martin Tetaz: CEDLAS-UNLP

Authors registered in the RePEc Author Service: Ricardo Perez-Truglia

No 5699, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Individual perceptions of income distribution play a vital role in political economy and public finance models, yet there is little evidence regarding their origins or accuracy. This study examines how individuals form these perceptions and posits that systematic biases arise from the extrapolation of information extracted from reference groups. A tailored household survey provides original evidence on the significant biases in individuals’ evaluations of their own relative position in the distribution. Furthermore, the data supports the hypothesis that the selection process into the reference groups is the source of those biases. Finally, this study also assesses the practical relevance of these biases by examining their impact on attitudes towards redistributive policies. An experimental design incorporated into the survey provides consistent information on the own ranking within the income distribution to a randomly selected group of respondents. Confronting agents’ biased perceptions with this information has a significant effect on their stated preferences for redistribution. Those who had overestimated their relative position and thought of themselves relatively richer than they were demand higher levels of redistribution when informed of their true ranking. This relationship between biased perceptions and political attitudes provides an alternative explanation for the relatively low degree of redistribution observed in modern democracies.

Keywords: perceptions of income distribution; preferences for redistribution; limited information; field experiment (search for similar items in EconPapers)
JEL-codes: D31 D83 H24 H53 I30 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2011-05
New Economics Papers: this item is included in nep-cbe, nep-exp, nep-lam, nep-ltv and nep-pol
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Published - published in: Journal of Public Economics , 2013, 98, 100-112

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Journal Article: Biased perceptions of income distribution and preferences for redistribution: Evidence from a survey experiment (2013) Downloads
Working Paper: Biased Perceptions of Income Distribution and Preferences for Redistribution: Evidence from a Survey Experiment (2012) Downloads
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