Perceptional inequality and preferential judgements: An empirical examination of distributional axioms

Abstract

There are two categories of income distribution evaluations: first, the more-or-less “value-free” perception of income inequality as a statistical dispersion; and second, the valuation of income distributions according to an explicit social welfare function which is meant to capture all of society's value judgements. These societal value judgements can be expressed in the form of preferences. Whereas the inequality perception of income distributions appeals to an observer's sober judgement, the revelation of preferences with respect to specific income distributions appeals to his or her sentiments.

This paper is an empirical analysis which investigates the juxtaposition of preferences with respect to income distributions and corresponding perceptions of distributional inequality. We do this through a questionnaire in which attitudes towards various distributional axioms are tested. The source of our data is 1773 completed questionnaires collected from five German universities.

Based on our data, we observe that individuals' preference orderings over the set of income distributionssubstantially deviate from their perceptions of distributional inequality. In fact, our test responses showed that even when some income distribution is judged to be more unequal than another, that distribution might be preferred, as it accords higher incomes to each individual. We hold that the preference for these greater incomes expresses a compensation for the increased degree of inequality. This explanation applies both to equiproportional and to equal fixed-sum increases in incomes, which implies a support of Paretian ethics.