What Shapes Individual Perceptions of Economic Inequality? Objective Conditions Vs. Subjective Motivations

Rather than objective levels, individual perceptions of economic inequality have been found to have a strong impact on people’s attitudes and behavior, with far-reaching consequences at the individual, societal and regime level. However, the ability of lay people to accurately perceive economic inequality is debated. While some scholars conclude that “in recent years ordinary people have known little about the extent of income inequality in their societies, its rate and direction of change” (Gimpelson and Treisman 2018, p. 28), others explain this by pointing to mismeasurement rather than misperception. In light of this, the question remains: what shapes individual perceptions of phenomena such as economic inequality, and to what extent do these perceptions actually reflect real-world conditions? Addressing these questions is essential for understanding when, why and in what ways people do or do not show an attitudinal or behavioral reaction to economic differences. Exploring the origins of inequality perceptions could also shed light on why high or rising levels of economic discrepancies have not led to increased demand for redistribution, as the political economy literature claims. Intending to fill this gap, this paper examines (1) whether perceptions of economic inequality are mainly shaped by objective conditions or subjective motivations. Furthermore, we test (2) whether the influencing factors differ between perceptions of income and wealth inequality. To do so, we implemented several items to the German GESIS Panel that capture individual perceptions of income and wealth inequality. While the longitudinal nature of the data allows us to account for a wide range of potential influences, we additionally assigned each respondent to a geographical context at the NUTS3 level and supplemented the data with contextual information on the objective conditions in each NUTS3 unit. Finally, we conducted a multi-level analysis that allowed us to explore the impact of individual-level and contextual factors on perceptions of economic inequality. According to the results (N = 3011), subjective perceptions of economic inequality are primarily driven by subjective motivations rather than by objective conditions, with only minor differences in the composition of impact factors between perceptions of income and wealth inequality. This is a valuable finding because it shows that not only the response to, but also the perception of real-world phenomena is subject to motivational influences. The contribution of the paper is that it systematically examines the impact of both a wide range of individual-level and contextual factors on individual perceptions of inequality. In doing so, it adds new insights to the literature on perceptions of real-world phenomena in general and on perceptions of economic inequality in particular. By showing that perceptions of economic disparities are strongly influenced by motivational factors rather than by objective conditions, the findings of this paper have important implications for researchers studying perceptions of economic inequality and its repercussions as well as for policy makers.