Abstract

http://ssrn.com/abstract=1817906
 
 

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


Guillermo Cruces


Universidad Nacional de La Plata - Centro de Estudios Distributivos, Laborales y Sociales (CEDLAS); IZA

Ricardo Perez Truglia


Harvard University - Department of Economics

Martin Tetaz


Universidad Nacional de La Plata - Centro de Estudios Distributivos, Laborales y Sociales (CEDLAS)

April 20, 2011


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.

Number of Pages in PDF File: 35

Keywords: perceptions of income rank, subjective probabilities, subjective income distribution, relative income, information, field experiment, redistribution

JEL Classification: D31, H24, I30

working papers series


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Date posted: April 24, 2011  

Suggested Citation

Cruces, Guillermo and Perez Truglia, Ricardo and Tetaz, Martin, Biased Perceptions of Income Distribution and Preferences for Redistribution: Evidence from a Survey Experiment (April 20, 2011). Available at SSRN: http://ssrn.com/abstract=1817906 or http://dx.doi.org/10.2139/ssrn.1817906

Contact Information

Guillermo Cruces (Contact Author)
Universidad Nacional de La Plata - Centro de Estudios Distributivos, Laborales y Sociales (CEDLAS) ( email )
Centro de Estudios Distributivos, Laborales y
Sociales, Calle 6 e/47 y 48
La Plata, Provincia de Buenos Aires 1900
Argentina
HOME PAGE: http://cedlas.econo.unlp.edu.ar
IZA
P.O. Box 7240
Bonn, D-53072
Germany
Ricardo Nicolas Perez Truglia
Harvard University - Department of Economics ( email )
Cambridge, MA 02138
United States
HOME PAGE: http://www.people.fas.harvard.edu/~rtruglia/
Martin Tetaz
Universidad Nacional de La Plata - Centro de Estudios Distributivos, Laborales y Sociales (CEDLAS) ( email )
Calle 6 e/47 y 48
La Plata, Provincia de Buenos Aires 1900
Argentina
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