PublicDisclosureAuthorized PublicDisclosureAuthorized PolicyResearchWorkingPaper10505 (Perceptionsof)Inequality,DemandforRedistribution,andGroup-SpecificPublicGoods ASurveyExperimentinIndia MaurizioBussoloAkshayDixit SouthAsiaRegion OfficeoftheChiefEconomistJune2023 PolicyResearchWorkingPaper10505 Abstract Thispaperusesdatafromasurveyof116,061householdsinIndiatostudypeople’sbeliefsaboutinequalityanddemandforredistribution.Thefindingsshowthatahousehold’sbeliefsaboutinequality,impliedbytheperceptionoftheirpositionontheincomedistribution,isnegativelycorrelatedwithsupportforreducinginequality.Thisisrelevantsincetherearesignificantdifferencesbetweenwhereindividualsbelievetheirhouseholdstandsandtheiractualposition,withthegapbetweenperceivedandactualpositionexceed-ingtwodecilesonaverage.Despitetheselargedifferences,informingindividualsoftheirhousehold’spositionontheincomedistributionhasnodiscernibleeffectonsupportforreducinginequality.Thepaperpositsthatdemandforredistributionmaybeunresponsivetothisinformation becauseitisbasedonexclusivelyonhousehold’sincomeanddoesnotaccountforthesharingofresourceswithincommunities.Incommunitieswheregroup-specificpublicgoods,suchasreligiousandsocialgoods,arepresent,classantagonismandredistributionaremitigatedbycommunitysolidarity.Householdsbenefitfromthesegoods,andsuchbenefitsaltertheindividuals’beliefsofinequality.Consis-tentwiththisprediction,theaverageindividualperceivestheirhouseholdasricherindistrictswithagreatersupplyofreligiousorsocialgoods.Thesharingofresourceswithinreligiousorethnicgroupscanshapeperceptionsoftheincomedistributionandreducesupportforredistributionwithinthesegroups,andthusrequiresseriousconsiderationinstudiesofinequality. ThispaperisaproductoftheOfficeoftheChiefEconomist,SouthAsiaRegion.ItispartofalargereffortbytheWorldBanktoprovideopenaccesstoitsresearchandmakeacontributiontodevelopmentpolicydiscussionsaroundtheworld.PolicyResearchWorkingPapersarealsopostedontheWebathttp://www.worldbank.org/prwp.Theauthorsmaybecontactedatmbussolo@worldbank.organdatakshay_dixit@g.harvard.edu. ThePolicyResearchWorkingPaperSeriesdisseminatesthefindingsofworkinprogresstoencouragetheexchangeofideasaboutdevelopmentissues.Anobjectiveoftheseriesistogetthefindingsoutquickly,evenifthepresentationsarelessthanfullypolished.Thepaperscarrythenamesoftheauthorsandshouldbecitedaccordingly.Thefindings,interpretations,andconclusionsexpressedinthispaperareentirelythoseoftheauthors.TheydonotnecessarilyrepresenttheviewsoftheInternationalBankforReconstructionandDevelopment/WorldBankanditsaffiliatedorganizations,orthoseoftheExecutiveDirectorsoftheWorldBankorthegovernmentstheyrepresent. ProducedbytheResearchSupportTeam (Perceptionsof)Inequality,DemandforRedistribution,andGroup-SpecificPublicGoods:ASurveyExperimentinIndia MaurizioBussolo1 AkshayDixit2 JELClassification:D31,D63,H24,H41,I30,Z13 Keywords:Community;Publicgoods;Inequality;Distribution;BiasedPerceptions. Acknowledgments:WethankRaviKanburforencouragingustowritethispaper,participantsattheComparativePoliticsworkshopatHarvardUniversityforhelpfulcomments,andNayantaraSarmaforheractivecontributionstotheresearch.WearegratefultoMaheshVyasandKaushikKrishnanforfieldingquestionsoninequalityandredistributionasapartoftheConsumerPyramidsHouseholdSurvey(CPHS)inJuly-August2021,andtotheIndiaCountryManagementUnitfortheirusefulcomments. 1TheWorldBank,mbussolo@worldbak.org 2HarvardUniversity,akshay_dixit@g.harvard.edu 1.Introduction Howdoesanindividual’sperceptionoftheirpositionontheincomedistributioninfluencetheirbeliefsaboutinequalityandtheirdemandforredistribution?Whatshapesthisperceptionofone’srelativepositioninthefirstplace?Agrowingliteratureexaminesthesequestions(Alesina,Glaeser,andSacerdote2001;Alesina,Stantcheva,andTeso2018;BenabouandOk2001;BenabouandTirole2006;Bussolo,Ferrer-i-Carbonell,GiolbasandTorre2021;IversenandSoskice2020;MoandConn2018).However,existingresearchhasstudiedthemmainlyinhighincomecountries.Indiaremainssurprisinglyunderstudied,consideringthatitisapopulousdemocracythatharborsadeeplyunequalsociety. WepresentresultsfromthefirstnationwidestudyofperceptionsoftheincomedistributioninIndia.Ourdatacomesfromasurveyof116,061households,spanningallmajorstatesofIndia.Weexaminepeople’sbeliefsaboutwhichdeciletheirhouseholdoccupiesontheincomedistribution,andcomparethistothehousehold’sactualpositionbasedonincomedatacollectedonamonthlybasisovernearlytwoyears.Wefindthatthedifferencebetweenperceivedandincome-baseddecileinIndiaislarge,exceedingtwodecilesonaverage.Moreover,over70%ofthesampleperceivethemselvesaspoorerthantheyarebasedonincome.Whilethepresenceofmisperceptionshasbeenwidelydocumentedacrosscontexts(Cansunar2021;Cruces,Perez-Truglia,andTetaz2013;GimpelsonandTreisman2018;HoyandMager2020),themagnitudeweobserveisstriking,asisthewidespreadunderestimationofone’sposition. Wefindthathouseholdnominalincome(theobjectivepositionofthehouseholdintheincomedistribution)doesnotpredictsupportforreducinginequalityinIndia.Rather,wherepeoplebelievetheirhousehol