A network-based explanation of inequality perceptions

Schulz, Jan; Mayerhoffer, Daniel M.; Gebhard, Anna

doi:10.1016/j.socnet.2022.02.007

Cited by 9 publications

(7 citation statements)

References 93 publications

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“…We are thus able to replicate the main finding of the canonical model of 'expenditure cascades' by Frank et al (2014) within plausible and endogenously evolving social networks. However, we also find that effect sizes are both state-dependent for the very same behavioural parameters and decrease with homophily because for the given graph-generating process, two counteracting effects mediate the effect of actual inequality on perceived inequality (Schulz et al, 2022). Firstly, holding the network-topology constant, increases in aggregate inequality also increase inequality within perception groups and thus decrease savings.…”

Section: Inequality and Aggregate Savingsmentioning

confidence: 58%

“…The link function's exponential character ensures that those with large income differences become unlikely picks even at low homophily strengths. For an extensive analytical discussion of this linkage behaviour, see Schulz et al (2022). While our linkage function represents a tractable reduced-form representation of the empirically wellestablished homophily, Falk and Knell (2004) demonstrate that endogenous reference groups can emerge from the social comparisons of agents aiming to self-improve and self-enhance.…”

Section: Network Generationmentioning

confidence: 93%

“…These include the small-world property which holds across many different domains (Galaskiewicz, 2007;Newman, 2001;Uzzi & Spiro, 2005;Weeden & Cornwell, 2020), homophily in tie-formation, especially for economic class (Boucher, 2015;Cepić & Tonković, 2020;Huckfeldt, 1983;Malacarne, 2017;Mayer & Puller, 2008) and their sparsity, especially when focusing on close ties (De Giorgi, Frederiksen, & Pistaferri, 2020;Mac Carron, Kaski, & Dunbar, 2016). Schulz et al (2022) present a model of homophilic tie formation that can generate these stylised facts of empirical graph topologies as well as being able to replicate all the relevant findings on positional self-assessment and perceptions of inequality. Since our argument builds on status consumption, which rests on the individuals' perception of consumption, we adopt this modelling framework as an algorithm for plausible social networks.…”

Section: Related Literaturementioning

confidence: 99%

“…This culturally evolutionist perspective implies that conspicuous consumption is a socially learned activity acquired through observation and imitation (Koliofotis, 2021;Witt, 2001). As a direct corollary, individuals must be able to observe others' consumption practices in order to emulate them, which we formalise by a plausible perception network following Schulz et al (2022). This complex interaction at the meso-level thus mediates and shapes the effect of micro-level behaviour (i.e., individual consumption) on macro-level outcomes (i.e, expenditure distributions and aggregate consumption levels) (Foster, 2021).…”

Section: Introductionmentioning

confidence: 99%

“…The foundational contribution byFrank, Levine, and Dijk (2014) only builds on classifications according to income deciles and does not include a discussion of inner-decile links thatSchulz, Mayerhoffer, and Gebhard (2022) find to be of crucial importance for perceptions.…”

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confidence: 99%

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A Network Approach to Consumption

Schulz¹,

Mayerhoffer²

2022

Preprint

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The nexus between debt and inequality has attracted considerable scholarly attention in the wake of the global financial crisis. One prominent candidate to explain the striking co-evolution of income inequality and private debt in this period has been the theory of upward-looking consumption externalities leading to expenditure cascades. We propose a parsimonious model of upward-looking consumption at the micro level mediated by perception networks with empirically plausible topologies. This allows us to make sense of the ambiguous empirical literature on the relevance of this channel. Up to our knowledge, our approach is the first to make the reference group to which conspicuous consumption relates explicit. Our model, based purely on current income, replicates the major stylised facts regarding micro consumption behaviour and is thus observationally equivalent to the workhorse permanent income hypothesis, without facing its dual problem of 'excess smoothness' and 'excess sensitivity'. We also demonstrate that the network topology and segregation has a significant effect on consumption patterns which has so far been neglected.

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Section: Inequality and Aggregate Savingsmentioning

confidence: 58%

Section: Network Generationmentioning

confidence: 93%

Section: Related Literaturementioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

mentioning

confidence: 99%

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A Network Approach to Consumption

Schulz¹,

Mayerhoffer²

2022

Preprint

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When perception shapes reality: Effects of perceived income inequality and social mobility on affective polarization

Merten,

Niedringhaus

2024

J Econ Inequal

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Perception and privilege

Mayerhoffer

Schulz

2022

Appl Netw Sci

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Inequality perceptions differ along racial and gendered lines. To explain these disparities, we propose an agent-based model of localised perceptions of the gender and racial wage gap in networks. We show that the combination of homophilic graph formation and estimation based on locally limited knowledge can replicate both the underestimation of the gender or racial wage gap that empirical studies find and the well-documented fact that the underprivileged perceive the wage gap to be higher on average and with less bias. Similarly, we demonstrate that the underprivileged perceive overall inequality to be higher on average. In contrast to this qualitative replication, we also show that the effect of homophilic graph formation is quantitatively too strong to account for the empirically observed effect sizes within a recent Israeli sample on perceived gender wage gaps. As a parsimonious extension, we let agents estimate using a composite signal based on local and global information. Our calibration suggests that women place much more weight on the (correct) global signal than men, in line with psychological evidence that people adversely affected by group-based inequities pay more attention to global information about the issue. Our findings suggest that (educational) interventions about the global state of gender equality are much more likely to succeed than information treatments about overall inequality and that these interventions should target the privileged.

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A network-based explanation of inequality perceptions

Cited by 9 publications

References 93 publications

A Network Approach to Consumption

A Network Approach to Consumption

When perception shapes reality: Effects of perceived income inequality and social mobility on affective polarization

Perception and privilege

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