New studies reveal two factors that mask economic inequality

The beliefs someone holds and the environment in which they live and work shape how much economic inequality people report seeing, according to new research from the School of Management.

Two studies — one in the Journal of Experimental Social Psychology and another in Nature Communications — reveal that individuals who believe in the fairness of socioeconomic institutions and those living or working in geographical areas where rich and poor are separated from each other perceive less economic inequality than those who question institutional fairness or are exposed to mixed-income spaces.

“Even when we expose people to identical levels of income inequality in controlled environments, their personal beliefs or the geographical separation between the rich and the poor consistently shape how much inequality people report seeing,” says Daniela Goya-Tocchetto, assistant professor of organization and human resources, who co-authored both studies.

To understand what motivates people to see inequality and be concerned about it, researchers conducted eight surveys of more than 4,000 participants to examine the factors that shape attitudes toward unequal distribution of wealth. In a separate study, researchers analyzed more than two decades of data regarding attitudes toward inequality and surveyed more than 2,000 participants to understand how economic segregation shapes how much economic inequality people see.

Despite growing disparities in income, public opinion often underestimates the level of economic inequality in society. This new research suggests this underestimation may be in part due to people’s personal beliefs and how close they live to people of different socioeconomic status.

Importantly, the findings also reveal the extent to which people care about addressing inequality depends on the extent to which they see the inequality in the first place.

When people believe the system is fair, for example, they perceive income gaps as smaller, leading to lower support for policies such as tax reforms, health care provisions, minimum wage increases and caps on executive pay.

When people live and work in highly segregated areas, they see less economic inequality, leading to more positive attitudes toward inequality and decreased support for government policies that aim to address it.  

“The findings are a reminder that confronting inequality is not just about changing policy; it requires addressing the psychological lens through which people see the world,” says Goya-Tocchetto. 

Goya-Tocchetto collaborated on the studies, both available online ahead of publication, with Aaron C. Kay, J.Rex Fuqua Professor of International Management in the Duke University Fuqua School of Business; B. Keith Payne, professor of psychology and neuroscience at the University of North Carolina at Chapel Hill; Shai Davidai, assistant professor of business in the Columbia Business School; and M. Asher Lawson, assistant professor of decision sciences at INSEAD.