In the eye of the beholder: Subjective inequality measures and individuals' assessment of market justice

This study presents a simple empirical framework suitable for describing individuals' subjective evaluations of wage inequality and their normative assessment of market justice. The framework is illustrated using survey data from the International Social Survey Program from Switzerland. Although most individuals accept the fact that there are quite large pay differentials across different occupations, they would still prefer a more equal distribution of market wages. The empirical analysis further shows that financial self-interest, normative beliefs, and perceptions of how wages are determined all have an impact on the assessment of market justice. Finally, subjective inequality measures and the assessment of market justice turn out to be substantive predictors of individuals' general support for the welfare state and their party identification.

Research highlights► Most individuals accept quite large pay differentials across different occupations. ► Therefore, absolute equality is not viewed as a fair distribution in general. ► Most individuals prefer a more equal distribution than what they perceive to exist. ► Both self-interest and normative beliefs influence the assessment of market justice. ► Subjective inequality measures are substantive predictors of political preferences.