This chapter focuses on an important aspect of economic inequality – the question of how people perceive inequality and whether these perceptions deviate in any meaningful way from statistical measures of inequality. Using a novel approach, the author investigates whether individuals across different countries are able to correctly estimate the shape of income distribution of the country where they reside. The author further investigates whether individuals have the distribution of a particular reference group in mind when they answer questions on inequality. The author finds that perceptions of inequality are frequently shaped by reference groups such as those formed according to educational attainment, age, and gender.
I would like to thank Sarah Thomas, Wim Vijverberg, Leslie McCall, Janet Gornick, Jonathan Baron, Branko Milanovic, Jasper Thomas, anonymous reviewers, participants at the PAA 2017 conference, and students at the inequality seminar at the Graduate Center of City University of New York for their insights that greatly assisted this research. You can find all the code used in this chapter here: https://github.com/ahdvnd/Papers.
Hadavand, A. (2018), "Misperceptions: An Analysis of Subjective Economic Inequality", Bishop, J.A. and Rodríguez, J.G. (Ed.) Inequality, Taxation and Intergenerational Transmission (Research on Economic Inequality, Vol. 26), Emerald Publishing Limited, Bingley, pp. 247-281. https://doi.org/10.1108/S1049-258520180000026011
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