Perceptions of inequality: consequences for social networks, preferences, and trust

• Applicant: Dr. Dietmar Fehr
• Subject Area: Economic Policy, Applied Economics ; Economic Theory
• Term: from 2017 to 2022
• Project identifier: Deutsche Forschungsgemeinschaft (DFG) - Project number 326066371

• Final Report Year: 2022

Final Report Abstract

One insight of the project is that people are not well informed about their relative standing in the income and wealth distribution, not only in the German case but also at the global level. These (mis-)perceptions are persistent over time and they have implications on policy preferences, distributional preferences, and risk preferences. For example, people reduce their support for global redistribution if they learn that they are richer than thought at the national level. Many concrete policies on immigration and climate change involve transfers from people in rich countries to people in poor countries. Taken at face value, our results suggest that such policies will not enjoy much support among people in a rich country such as Germany. Another insight is that meritocracy can reinforce pre-existing inequality and that inequality can have detrimental effects on social interactions. Meritocratic beliefs affect how much inequality people accept, which in turn determines the opportunities for the next generation. If this inequality is seen as unjust, for example, because it results from an unlevel playing field or from other factors beyond one’s control, it can affect social interactions through a decline in social capital.

Publications

• (2018). “Heterogeneous Fairness Views,” Working paper and Dissertation chapter, University of Mannheim
  Marcel Preuss
  
• (2020). “Inequality, Fairness and Social Capital,” European Economic Review, Vol. 129
  Fehr, Dietmar, Hannes Rau, Stefan Trautmann, and Yilong Xu
  (See online at https://doi.org/10.1016/j.euroecorev.2020.103566)
• (2022). “Misperceiving Economic Success: Experimental Evidence on Meritocratic Beliefs and Inequality Acceptance,” AWI Working Paper
  Fehr, Dietmar and Martin Vollmann
  (See online at https://doi.org/10.11588/heidok.00029071)
• (2022). “Perceived Relative Wealth and Risk Taking,” CESifo Working Paper
  Fehr, Dietmar and Yannick Reichlin
  
• (2022). “Perceptions of Equality of Opportunity and Inequality Acceptance,” Innlab Working Paper
  Fehr, Dietmar, Daniel Müller, and Marcel Preuss