Assessing the Gap Between Actual and Perceived Income: A Cross-Country Comparison

Proceedings of The 7th International Conference on Applied Research in Management, Business and Economics

Year: 2023



Assessing the Gap Between Actual and Perceived Income: A Cross-Country Comparison

Prof. Savaş Çevik




This study examines the disparities between actual and perceived income at the individual level through cross-country comparisons using data from the World Value Survey (WVS) and Life in Transition Survey (LiTS) by EBRD. The aim is to identify factors influencing individuals’ perceptions of their income relative to the objective reality of their income levels. Besides we seek to show possible explanations on country level disparities. Study employes individual level social survey data to explore the extent of the gap between actual and perceived income and the potential explanatory factors behind it. These factors include reference groups, social comparisons, aspirational bias, awareness gaps, cognitive biases, non-monetary considerations, and psychological factors. The findings reveal significant variations in the gap between actual and perceived income across countries, emphasizing the influence of social, cultural, and psychological factors on individuals’ income perceptions. Besides country level disparities indicates that the importance of the impact of country level social, economic, and political factors. This research contributes to the existing literature by providing empirical evidence on the differences between actual and perceived income, utilizing a large-scale cross-country dataset. The insights gained from this study have implications for policymakers, economists, and sociologists, enhancing our understanding of subjective income assessments and their broader socio-economic implications.

Keywords: actual income, cross-country comparisons, Life in Transition Survey, perceived income; social surveys, World Value Survey