An Empirical Analysis of the Determinants of Perceived Inequality

Abstract

Perception of inequality is important for the analysis of individuals motivations and decisions and for policy assessment. Despite the broad range of analytic gains that it grants, our knowledge about measurement and determinants of perception of inequality is still limited, since it is intrinsically unobservable, multidimensional, and essentially contested. Using a novel econometric approach, we study how observable individual characteristics affect the joint distribution of a set of indicators of perceived inequality in specific domains. Using data from the International Social Survey Programme, we shed light on the associations among these indicators and how they are affected by covariates. The approach also gives insights on some results in the literature on inequality. The role of many subjective indicators for the perception of inequality is re-examined and examples of policy applications are reviewed. The importance of our empirical approach to the measurement of perceived inequality is, in so doing, reinforced