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"A 20% income increase for everyone?": The effect of relative increases in income on perceived income inequality

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  • Lembregts, Christophe
  • Pandelaere, Mario

Abstract

Most research on income inequality implicitly assumes that a fixed percentage increase in income across all income levels does not alter income inequality. In contrast with this assumption, we show that relative increases in income lead to increased perceptions of inequality, even when buying power is held constant. In a second experiment, we extended these findings using a fictitious currency, thereby eliminating effects of using a familiar currency. In study 3, we demonstrate that feelings of envy and fairness are affected by a fixed percentage income increase.

Suggested Citation

  • Lembregts, Christophe & Pandelaere, Mario, 2014. ""A 20% income increase for everyone?": The effect of relative increases in income on perceived income inequality," Journal of Economic Psychology, Elsevier, vol. 43(C), pages 37-47.
    • Handle: RePEc:eee:joepsy:v:43:y:2014:i:c:p:37-47
    DOI: 10.1016/j.joep.2014.04.008
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    References listed on IDEAS

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    2. Ziano, Ignazio & Lembregts, Christophe & Pandelaere, Mario, 2022. "People weigh salaries more than ratios in judgments of income inequality, fairness, and demands for redistribution," Journal of Economic Psychology, Elsevier, vol. 89(C).
    3. Eichhorst, Werner & Wozny, Florian & Mähönen, Erno, 2015. "What Is a Good Job?," IZA Discussion Papers 9461, Institute of Labor Economics (IZA).

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    More about this item

    Keywords

    Income inequality; Absolute differences; Relative thinking; Numerosity;
    All these keywords.

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior

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