Economic Context and Americans' Perceptions of Income Inequality*

Objectives. The increase in income inequality in the United States over the past three decades has been well documented, though Americans differ in their perceptions of rising inequality. In this article we investigate the degree to which context shapes individuals' perceptions of rising income inequality in the United States. Methods. Using objective data on state‐level income inequality and survey data from the 2004 American National Election Study (ANES), we estimate a series of ordered logit models depicting individuals' perceptions of rising income inequality as a function of state income inequality and various control variables. Results. We find that individuals residing in states with high income inequality are more likely than other individuals to perceive large increases in national income inequality over the past 20 years. We also consider possible interaction effects for state income inequality with political knowledge and family income, but our evidence suggests that such effects are limited to family income. We find that individuals from lower income strata are more likely to translate state income inequality into inequality perceptions than those with higher incomes. Conclusion. State inequality context significantly shapes individuals' perceptions of rising income inequality, particularly among those with lower incomes.