Core beliefs about ideas of justice and fairness are important as well. If individuals subscribe to value systems that are rooted strongly in egalitarian principles, their aversion to inequality (for any given level of inequality) may be higher than others and that may drive perceptions. These beliefs can be inculcated early in life with parents teaching their children to believe in a just world that rewards effort, educational investment and perseverance as opposed to thuggery and deceit to induce the right incentives (Benabou and Tirole, 2006). Or they can be manipulated through other inducements such as political indoctrination as shown by the differences in preferences for redistribution between East and West Germany despite having the same political and economic system prior to the separation (Alesina and Fuchs, 2007).

Perceptions about inequality are likely to be formed in a distinctly dynamic manner. As societies evolve, creating opportunities for some and not for others, they allow some to prosper while keeping others in penury and destitution. An individual’s own experience with this mobility may also determine how he/she perceives inequality. For example, an individual who is able to “ride the wave” and realize rank improvements in his own household income, despite a widening income distribution, may perceive inequality to be lower than somebody else in a different society with lower inequality but with limited prospects for upward mobility. As growth takes off inequality begins to rise, and in these early stages the tolerance for inequality, even among the poor, is fairly high. This is because in the growing inequality they see an opportunity for a better life for themselves and for their children. However, if the process of growth is such that it cannot deliver rising incomes for those in the bottom of the income distribution or in the extreme case, if the attendant rise in inequality ends up stifling prospects for economic betterment at the bottom of the distribution, then this will also be associated with disenchantment with the overall process.

# **_4.2. Analysis of Perceptions of Mobility_**

Now, using data from the survey carried out in 2014, we examine mobility experienced by households based on their self-assessed position in the “economic ladder” relative to where they were five years ago. If the respondent placed the household at a higher rung relative to where they considered themselves to be five years ago, we interpret that rank improvement as upward mobility. Similarly, if the household is placed at a lower rung of the ladder than where it was five years ago, we regard that as downward mobility. The household is deemed to have experienced no mobility if the rank is reported unchanged. The survey also asked about expected position in the same ladder five years from the time of interview and we use responses to that question relative to the current position to define expected upward, downward or no mobility. The results are presented in Figure 9 and show that 62 percent of Nepalis have experienced upward mobility, 6 percent have experienced downward mobility and 32 percent remained unchanged. Considering expected mobility, an overwhelming 86 percent of Nepalis expected to do better in the future with only a small fraction, 1 percent, expecting to do worse.

**Figure 9: The Proportion of Nepalis Moving Up, Down or remaining the Same in the Economic Ladder**

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