Perceived Inequality and Support for Redistribution

Abstract

In this paper, I investigate why the level of economic inequality does not explain the size of government redistribution by focusing on the voters’ perception about economic inequality. Because we have been experiencing a rise of economic inequality worldwide, we should expect democratic governments to redistribute more to mitigate inequality (Romer 1975; Roberts 1977; Meltzer and Richard 1981). It is not necessarily the case, however. I argue that the amount of redistribution does not correspond to the level of economic inequality because the assumption of the model that voters correctly understand the economic situation in which they reside does not hold. I will demonstrate this by examining survey data and revealing that people do not necessarily know how unequal their society is. People demand a larger public redistribution only if they realize that economic inequality is high. I will show that voters are more likely to support redistributive policies when they think inequality is large. On the other hand, voters do not request, and may even dislike redistribution increase unless they perceive large inequality. Following previous studies of public opinion on redistribution, I conduct a multilevel statistical analysis with which I can analyze individuals nested in different countries. Furthermore, I example closely the interesting case of Japan. For the first half-century after the Second World War, Japan combined rapid economy growth with remarkably little inequality. Beginning in the late 1980s, growth stopped and inequality rose, but I show that Japanese voters did not update their perceptions about inequality — most Japanese voters severely underestimate inequality.