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How we perceive our place in income distribution and how the perceptions deviate from reality

Author

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  • Gimpelson, V.

    (Centre for labour market studies at National Research University Higher School of Economics, Moscow, Russia)

  • Chernina, E.

    (Centre for labour market studies at National Research University Higher School of Economics, Moscow, Russia)

Abstract

We explore how individuals perceive their location in the income distribution and how these perceptions correspond to estimates provided by objective statistical data. Then we try to explain the deviations paying a special attention to past experience of income mobility, individuals may have, and to such psychological traits as feelings of optimism / pessimism. In our search for answers we use RLMS-HSE data for, 2016. In this round of the survey, respondents were asked to assign themselves to an income decile they belonged. We compare this self-estimate with the actual decile to which the household belongs given its income statistically measured. As some previous studies, we find systematic biases in perceptions. Individuals tend to put themselves in the middle of the distribution and perceive themselves relatively poorer as they in fact are. Our analysis suggests that the subjective place in the distribution depends neither on actual income level, nor its dynamics. General optimism in life and the perception that there have been positive changes in their life, tend to rise the subjective decile.

Suggested Citation

  • Gimpelson, V. & Chernina, E., 2020. "How we perceive our place in income distribution and how the perceptions deviate from reality," Journal of the New Economic Association, New Economic Association, vol. 46(2), pages 30-56.
  • Handle: RePEc:nea:journl:y:2020:i:46:p:30-56
    DOI: 10.31737/2221-2264-2020-46-2-2
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    More about this item

    Keywords

    income distribution; perceptions; inequality;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being

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