Misperceiving inequality

Abstract

A vast literature suggests that economic inequality has important consequences for politics and public policy. Higher inequality is thought to increase demand for income redistribution in democracies and to discourage democratization and promote class conflict and revolution in dictatorships. Most such arguments crucially assume that ordinary people know how high inequality is, how it has been changing, and where they fit in the income distribution. Using a variety of large, cross‐national surveys, we show that, in recent years, ordinary people have had little idea about such things. What they think they know is often wrong. Widespread ignorance and misperceptions emerge robustly, regardless of data source, operationalization, and measurement method. Moreover, perceived inequality—not the actual level—correlates strongly with demand for redistribution and reported conflict between rich and poor. We suggest that most theories about political effects of inequality need to be reframed as theories about effects of perceived inequality.

Globalization and electoral outcomes: Evidence from Italy

“…This is further investigated in the following section. 33 By the same token, as recently shown by Gimpelson and Treisman (2018), perceived inequality may differ from actual inequality, thereby adding a further subjective dimension to this issue. (1) through (4) is the percentage point change in the votes for each group of parties (farright, far-left, right-wing, and traditional/authoritarian/nationalist) and in column (5) the percentage point change in voters' turnout.…”

“…It appears of utmost importance to distinguish the effects mediated by 36 Indeed, the impact of globalization may be stronger at the local level or more effective in influencing the electorate. As observed by Gimpelson and Treisman (2018), individuals tend to overgeneralize from their immediate reference group and this leads to widespread misconceptions about the actual extent of inequality. Similarly, politically relevant misconceptions about labor market outcomes might more likely arise in small communities and wash out in the mix in large areas.…”

Determinants of governmental redistribution: Income distribution, development levels, and the role of perceptions

“…However, evidence stems from actual market inequality, whereas individual perceptions may be of greater importance in the creation of demand for redistribution, as discussed in recent studies (Niehues, 2014, Engelhardt and Wagener, 2014, and Gimpelson and Treisman, 2015. These examinations emphasize that perceptions of inequality are often biased, since individuals hold erroneous beliefs about income inequality, where the true extent of inequality is often underestimated.…”

“…Fernández-Albertos and Kuo (2016) employ data from a web-based survey in Spain and find that only 14 percent of the participants correctly assigned themselves to the decile in the income distribution to which they actually belong. Further studies (Niehues, 2014, Engelhardt and Wagener, 2014, and Gimpelson and Treisman, 2015 use data from the International Social Survey Programme (ISSP) on self-assessment by individuals concerning their position on the income scale to compare actual and perceived inequality across countries. They provide some evidence that the Meltzer-Richard effect may be less pronounced when examining actual inequality, but may increase if perceived inequality measures are analyzed, implying that it may be the perception of the electorate rather than objective data that drives the demand for redistribution.…”

Perceptions of Distributive Justice in Latin America during a Period of Falling Inequality

“…23 More recently, some papers have argued that models that include 'objective' measures of inequality to explain social phenomena such as conflict could be misleading since people do not directly observe the income distribution (or the Gini coefficient), but rather take decisions based on their perceptions of it (e.g. Gimpelson and Treisman, 2015). Thus, this evidence suggests perceived inequality, and not actual inequality, should be the relevant regressor in the models that relate social unrest with inequality.…”