Date created: | Last Updated:

Category: Project

Description: The misperception of income inequality is often touted as a critical barrier to more widespread support of redistributive policies. To address this misperception effectively, we must identify which part of the income distribution citizens misperceive and why. Drawing from five studies involving a total of 78,002 participants, representative samples from 40 countries, and pre-registered incentive-compatible experiments, we offer robust evidence that people consistently underestimate the amount of income held by the upper end of the income distribution, and this effect does not equally extend to lower income percentiles. These results take on particular importance given that increasing inequality in many developed countries arises from the disproportionate growth of incomes among the richest individuals. Critically, we find that this underestimation is driven in part by scope insensitivity, a cognitive bias that reduces citizens’ sensitivity to incomes at higher absolute levels. This bias becomes more pronounced ascending the income distribution. Our theory findings provide a nuanced explanation behind people’s lack of support for redistribution and highlight one key challenge to citizens’ recognition of income inequality when it is concentrated among the top.