(Mis-)perception of Inequality: Measures, determinants and consequences

Abstract

Despite being considered by many to be harmful for society, inequality has been rising in the past decades. How people experience the level of inequality may be different from the objective levels of inequality. In this literature review we systematically revisit common elicitation methods of perceived inequality and find that they lead to quite different conclusions. Yet, it is clear that most people’s perceptions of inequality are biased. Individuals’ past experience and exposure to local inequality, have profound impact on subjective perception of inequality and on redistribution preferences. Positive expectations about upward mobility explain lack of support for redistribution.