The misperception of income inequality is often touted as a critical barrier to more widespread
support of redistributive policies. Here, we examine to what extent and why (mis)perceptions
vary systematically across the income distribution. Drawing on data from four studies (N =
2,744)—including a representative sample and pre-registered ...
The misperception of income inequality is often touted as a critical barrier to more widespread
support of redistributive policies. Here, we examine to what extent and why (mis)perceptions
vary systematically across the income distribution. Drawing on data from four studies (N =
2,744)—including a representative sample and pre-registered incentive-compatible
experiments—we offer converging evidence that people specifically underestimate the amount
of income held by the top of the income distribution. While this selective underestimation is
likely driven by multiple mechanisms, including systemic factors, we find that cognitive biases
contribute to the observed pattern of results. The rise of inequality in many developed countries
has been documented before, and the fact that this growing inequality is largely driven by the
outsized gains of the richest individuals may pose new challenges previously underappreciated:
our theory and findings highlight that cognitive biases pose a key obstacle to people’s
recognition of the concentration of income among the richest individuals, and may potentially
distort their preferences for redistribution. We conclude by discussing future directions for
research and the importance of incorporating behavioral and cognitive limitations into the
design of redistributive public policy.
