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

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Author Info

  • Cruces, Guillermo

    ()
    (CEDLAS-UNLP)

  • Perez Truglia, Ricardo

    ()
    (Harvard University)

  • Tetaz, Martin

    (CEDLAS-UNLP)

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.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 5699.

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Length: 37 pages
Date of creation: May 2011
Date of revision:
Publication status: published in: Journal of Public Economics , 2013, 98, 100-112
Handle: RePEc:iza:izadps:dp5699

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Keywords: limited information; preferences for redistribution; perceptions of income distribution; field experiment;

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References

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  1. Benabou, Roland & Tirole, Jean, 2004. "Belief in a Just World and Redistributive Politics," Papers 08-15-2005a, Princeton University, Research Program in Political Economy.
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  10. Bénabou, Roland & Ok, Efe, 1997. "Social Mobility and the Demand for Redistribution : the POUM Hypothesis," IDEI Working Papers 78, Institut d'Économie Industrielle (IDEI), Toulouse, revised 1999.
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  15. Fong, Christina, 2001. "Social preferences, self-interest, and the demand for redistribution," Journal of Public Economics, Elsevier, vol. 82(2), pages 225-246, November.
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Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Biased Perceptions of Income Distribution and Preferences for Redistribution: Evidence from a Survey Experiment
    by maximorossi in NEP-LTV blog on 2011-05-27 18:13:19
  2. Información, percepciones, expectativas y resultados económicos (o de cómo el INDEC contribuye a reducir las demandas redistributivas)
    by Guillermo Cruces in Foco Económico on 2011-06-08 12:00:00
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
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Cited by:
  1. Leonardo Becchetti & Stefano Castriota & Elena Giachin, 2011. "Beyond the Joneses: Inter-country income comparisons and happiness," Working Papers 189, ECINEQ, Society for the Study of Economic Inequality.
  2. Andrew Dabalen & Rasyad Parinduri & Saumik Paul, . "The Effects of the Intensity, Timing and Persistance of Personal History of Mobility on Support for Redistribution," Discussion Papers 13/10, University of Nottingham, CREDIT.
  3. Engelhardt, Carina & Wagener, Andreas, 2014. "Biased Perceptions of Income Inequality and Redistribution," Hannover Economic Papers (HEP) dp-526, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
  4. Javier Olivera, 2014. "Preferences for redistribution after the economic crisis," Working Papers 334, ECINEQ, Society for the Study of Economic Inequality.
  5. SCHOKKAERT, Erik & TRUYTS, Tom, 2014. "Preferences for redistribution and social structure," CORE Discussion Papers 2014001, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  6. Hajdu, Tamás & Hajdu, Gábor, 2014. "Reduction of income inequality and subjective well-being in Europe," Economics Discussion Papers 2014-22, Kiel Institute for the World Economy.
  7. Ilyana Kuziemko & Michael I. Norton & Emmanuel Saez & Stefanie Stantcheva, 2013. "How Elastic Are Preferences for Redistribution? Evidence from Randomized Survey Experiments," NBER Working Papers 18865, National Bureau of Economic Research, Inc.
  8. repec:aia:ginidp:dp38 is not listed on IDEAS
  9. Tamas Hajdu & Gabor Hajdu, 2013. "Are more equal societies happier? Subjective well-being, income inequality, and redistribution," IEHAS Discussion Papers 1320, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
  10. Michael I. Norton & Dan Ariely, 2013. "American's desire for less wealth inequality does not depend on how you ask them," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 8(3), pages 393-394, May.
  11. Ada Ferrer-i-carbonell & Ramos, X. (Xavier), 2012. "GINI DP 38: Inequality and Happiness: A Survey," GINI Discussion Papers 38, AIAS, Amsterdam Institute for Advanced Labour Studies.

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