Social Position and Fairness Views on Inequality

Authors : Kristoffer Hvidberg, Claus Kreiner, and Stefanie Stantcheva

Publication: NBER Working Paper 28099 [Revise and Resubmit at the Review of Economic Studies], 2021

We link survey data on Danish people’s perceived income positions and views on inequality within various reference groups to administrative records on their reference groups, income histories, and life events. People are, on average, well aware of the income levels of their reference groups, but lower-ranked respondents in all groups tend to overestimate their own position among others because they believe others’ incomes are lower than is the case, while higher-ranked respondents underestimate their position. People view inequalities within co-workers and education group as most unfair, yet underestimate inequality the most exactly within these groups. Perceived fairness of inequalities is strongly related to current individual position, moves with shocks like unemployment or promotions, and changes when experimentally showing people their actual positions.