Perceptions of inequality and group-specific public goods

Abstract

We use data from a survey of 116,061 households in India to study beliefs about inequality. We uncover large differences between where individuals believe their household stands on the income distribution and their actual position. However, informing individuals that their household is poorer than they thought has no discernible effect on support for reducing inequality. We posit that support for reducing inequality may be unresponsive to information because such information disregards the sharing of resources within religious or ethnic groups, in the form of religious and social goods. Households, especially those in the lower rungs of the distribution, benefit from these goods, which may shape their beliefs about inequality and their demand for redistribution. In districts with a greater supply of religious or social goods, we find that the average individual perceives their household as richer. Our findings suggest that group-specific public goods, found in many countries beyond India, deserve greater consideration in studies of inequality.