Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/248926 
Year of Publication: 
2021
Series/Report no.: 
CESifo Working Paper No. 9381
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
Individuals often hold erroneous beliefs about their socio-economic status relative to others. We develop a new machine learning technique to measure these misperceptions and use large-scale international survey data to compute status misperception for 241,757 households from 97 countries (24 OECD, 73 non-OECD). We show that status misperception is a widespread phenomenon across the globe. Upward-biased perceptions are associated with lower preferences for redistribution and have direct consequences for welfare provision via the tax and transfer system. The effect accounts for approximately 9% of the variation in redistribution preferences, is independent of socio-demographic characteristics, robust to measurement errors in social surveys, and occurs similary when we change the underlying micro data or examine party preferences.
Subjects: 
misperceptions
machine learning
socio-economic status
preferences
redistribution
welfare provision
taxes and transfers
JEL: 
D31
H53
I30
C43
Document Type: 
Working Paper
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