A preliminary study on households' perceived income position

Abstract

This paper investigates households’ perceived income position by means of a survey and regression. From the survey, respondents provide demographic information about themselves and their households. They evaluate their households’ income positions by selecting one of the ten income deciles in a distribution, hereafter defined as perceived income position. The objective income position is the income decile that each household is being assigned to, based on their reported total income and their position in the sample income distribution. For the regression, the dependent variable is bias, the difference between perceived and objective income decile. The independent variables include characteristics of respondents and households. The empirical results show that a significant number of low-income households rank themselves in higher income deciles than their objective income deciles, while many high-income households underestimate their rank. There are also six factors that determine bias. They are (1) respondents who are retirees, (2) respondents who have post-secondary education, (3) respondents with housing type of either a) 3-room, b) 5-room, c) landed, (4) number of family members with tertiary qualifications, (5) income expenditure ratio and (6) number of working family members.