Too Much Redistribution, Too Little or Just Right?

Abstract

Abstract How informed are individuals about the income distribution in their own country? This article presents survey data showing that Norwegians tend to overestimate the level of inequality in Norway. This contrasts with survey data from the United States (US), presented in Norton and Ariely , showing that Americans vastly underestimate inequality in their own country. These findings are interpreted by emphasizing the effect existing differences in income have on peoples’ psychological capacity to observe income differences. Norwegians are also asked how they ideally would like income to be distributed. They construct an ideal income distribution that is surprisingly close to the actual (egalitarian) distribution in Norway. Americans also construct an ideal distribution that more closely resembles the distribution of income in Norway than in the US. Respondents’ preferences for small income differences are discussed with reference to recent findings in experimental and neurobiological research.