An optimal weighting scheme for a synthetic index of perception of inequality

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Abstract
This study develops a composite index to measure perception of inequality (PI), focusing on two domains: inequality of opportunity and inequality of outcome. Using survey responses from 24 OECD countries within the International Social Survey Programme (ISSP), we identify latent patterns in public perceptions of inequality and construct a PI score using a weighting scheme optimized through latent variable models. By aggregating various indicators related to societal and economic inequalities, we address multidimensionality and the inherent unobservability of PI, ensuring our index provides a nuanced and comprehensive representation. The optimal weighting methodology allows for clear comparisons across groups and over time, reflecting context-invariance in the outcome domain but multidimensional perceptions in the opportunity domain. Validations with objective inequality indicators, such as the Gini index and intergenerational mobility indices, confirm the robustness of our score. Our findings reveal the sensitivity of the perception of inequality to demographic and socioeconomic factors, aligning with previous research. This index offers a valuable tool for understanding public perceptions of inequality and its drivers, with implications for policy evaluation and social research. JEL codes: D63, D31, D83

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