Perceived Inequality and Policy Preferences

Abstract

Economic inequality in the US has increased since the 1950s, yet this has not been accompanied by increased taxation and redistribution. The question how US Americans (mis-)perceive this inequality and to what extent this perception can translate into a demand for redistribution has therefore become an important policy question and a recent academic debate. We investigate how perceived income inequality causally affects people’s fairness views and their support for redistribution in a comprehensive and well-powered survey experiment with a representative sample of US Americans. We find precisely estimated null effects. While US Americans underestimate the extend of poverty and, in particular, strongly overestimate the income of top earners, there is no evidence for a causal effect of perceived inequality on political views or behavior.

We test the role of a series of moderators and find that this null effect holds for different income groups and party affiliations, as well as for participants with different levels of trust in government and with different levels of perceived personal autonomy. Our study thus suggests that informing people about the extent of inequality in a society will not effectively alter their support for redistributive policies.

Keywords: perceptions of inequality, redistribution, information, fairness, trust, autonomy

JEL Classification: D31, D63, D90, H23