Global Evidence on Misperceptions and Preferences for Redistribution

68 Pages Posted: 1 Nov 2021

See all articles by Jennifer Elena Feichtmayer

Jennifer Elena Feichtmayer

University of Erlangen-Nuremberg-Friedrich Alexander Universität Erlangen Nürnberg

Klaus Gründler

CESifo (Center for Economic Studies and Ifo Institute) - Ifo Institute

Date Written: 2021

Abstract

Individuals often hold erroneous beliefs about their socio-economic status relative to others. We develop a new machine learning technique to measure these misperceptions and use large-scale international survey data to compute status misperception for 241,757 households from 97 countries (24 OECD, 73 non-OECD). We show that status misperception is a widespread phenomenon across the globe. Upward-biased perceptions are associated with lower preferences for redistribution and have direct consequences for welfare provision via the tax and transfer system. The effect accounts for approximately 9% of the variation in redistribution preferences, is independent of socio-demographic characteristics, robust to measurement errors in social surveys, and occurs similarly when we change the underlying micro data or examine party preferences.

Keywords: misperceptions, machine learning, socio-economic status, preferences, redistribution, welfare provision, taxes and transfers

JEL Classification: D310, H530, I300, C430

Suggested Citation

Feichtmayer, Jennifer Elena and Gründler, Klaus, Global Evidence on Misperceptions and Preferences for Redistribution (2021). CESifo Working Paper No. 9381, Available at SSRN: https://ssrn.com/abstract=3953017 or http://dx.doi.org/10.2139/ssrn.3953017

Jennifer Elena Feichtmayer (Contact Author)

University of Erlangen-Nuremberg-Friedrich Alexander Universität Erlangen Nürnberg ( email )

Schloßplatz 4
Erlangen, DE Bavaria 91054
Germany

Klaus Gründler

CESifo (Center for Economic Studies and Ifo Institute) - Ifo Institute ( email )

Poschinger Str. 5
Munich, 01069
Germany

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