Explain how members of different groups perceive inequality
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Although people’s perception of (income or wealth) inequality has important ef-
fects on their decisions as economic agents or voters, little is known about how
perceptions relate to objective inequality. We present a novel formal framework
that is based on the assumption that people typically do not observe the entire
income (wealth) distribution but that their guesses about the extent of inequal-
ity are based on heterogeneous reference groups. This framework implies that the
perception of inequality will be different for different positions in the income distri-
bution but that for a specific position various dimensions of the inequality perception
should be related to each other.
fects on their decisions as economic agents or voters, little is known about how
perceptions relate to objective inequality. We present a novel formal framework
that is based on the assumption that people typically do not observe the entire
income (wealth) distribution but that their guesses about the extent of inequal-
ity are based on heterogeneous reference groups. This framework implies that the
perception of inequality will be different for different positions in the income distri-
bution but that for a specific position various dimensions of the inequality perception
should be related to each other.
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