distributive justice, Corneo and Fong (2008) find that US households put a monetary value on social justice of about a fifth of their disposable income.

In this paper, we study the general population’s beliefs about distributive justice, i.e., the perception of whether income distribution is fairly distributed, in the context of a pronounced decline in the income inequality in Latin America (LA), a highly unequal region. Our approach is to combine income microdata originated from household surveys with perceptions data from opinion polls surveys. We exploit the heterogeneity across years, countries, and individuals within countries to analyze how our views of fairness relate to the actual levels of income inequality.

Evidence of the relationship between fairness perceptions and income inequality, particularly in LA, is rather scarce. In Argentina, Rodriguez (2014) finds that people who consider their income to be fair tend to perceive lower levels of inequality. The work closest to this paper is CEPAL (2010), which shows that perceptions of distributive inequity in LA remained persistently high during the 1997-2007 period, consistent with the high levels of inequality of the region.

In the first part of the paper we document a series of stylized facts. After a decade of increasing disparities in LA, the 2000s saw a remarkable decrease in the levels of inequality. Despite this, the region continues to be one of the least egalitarian in the world, with levels of inequality comparable to those of Africa (Alvaredo and Gasparini, 2015). To the best of our knowledge, we are the first to show that unfairness perceptions fell during the 2000s in line with the evolution of income inequality, although we find that unfairness perceptions are not very responsive to changes in inequality. During the 2002-13 period, a 1 percentage point decrease in the Gini coefficient was associated with a 1.4 percentage point decrease in the share of the population perceiving the distribution as unfair or very unfair.

The evolution of unfairness and inequality was consistent across countries: perceptions moved in the same direction as the Gini coefficient for 17 of the 18 countries of the region for which microdata are available. We also show that this change was widespread across very heterogeneous groups of the population, and that the decline in unfairness perceptions was driven mainly by a reduction in the intensity of such beliefs (i.e., compared to ten years ago, fewer people perceive the distribution as very unfair).

Next, we shed some light on the discussion of whether inequality should be measured with relative vs. absolute indicators, by analyzing which indicators are more correlated with unfairness perceptions. We show that relative indicators—and in particular, the Gini coefficient—are the ones mostly correlated with people’s perception of fairness.

In the second part of the paper we explore how individual factors and belief systems affect how inequality is perceived. We find that older, unemployed and more educated people are more likely to perceive income distribution as unfair. A decomposition exercise provides evidence on the relative contribution of composition effects vis-à-vis changes in aggregate inequality trends, to explain the decline in unfairness perceptions during the last 3