Working Paper: CEPR ID: DP15877
Authors: Kristoffer Balle Hvidberg; Claus T. Kreiner; Stefanie Stantcheva
Abstract: We link survey data on Danish people’s perceived income positions and fairness views on inequality within various reference groups to administrative records on their reference groups, income histories, and life events. People are, on average, well- informed about the income levels of their reference groups. Yet, lower-ranked respondents in all groups tend to overestimate their own position among others because they believe others’ incomes are lower than is the case, while the opposite holds for higher-ranked respondents. Misperceptions of positions in reference groups relate to proximity to other individuals, transparency norms, and visible signals of income. People view inequalities within their co-workers and education groups as significantly more unfair than overall inequality, yet underestimate inequality the most exactly within these groups. Views on the fairness of inequalities are strongly correlated with an individual’s current position, move with shocks like unemployment or promotions, and change when experimentally showing people their actual positions. However, the higher perceived unfairness of income differences within co-workers and education groups stays unchanged. The theoretical framework shows that this can have important implications for redistribution policy.
Keywords: social class; fairness views; inequality; misperceptions; information; experiment
JEL Codes: D31; C81
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| lower-ranked individuals overestimate social positions (C92) | perceive others' incomes as lower (D31) |
| higher-ranked individuals underestimate social positions (D73) | assume others earn more (J31) |
| perceived unfairness regarding income differences (D31) | higher perceived unfairness within specific groups (D63) |
| changes in social position (J62) | shifts in fairness views (D63) |
| randomized information treatment (C90) | changes in fairness views (D63) |
| accurate information about social position (Z13) | fairness views on inequality (D63) |
| misperceptions of income distribution (D31) | demands for redistribution (D39) |