The Role of Visible Wealth for Deprivation

Motivated by the lack of literature linking actual to perceived relative deprivation, this paper assesses the role of visibility in goods and assets vis-à-vis income behind perceptions of relative deprivation. We rely on household survey data that include unique information on reported perceived deprivation with a pre-specified reference group, namely others in the same town or village. Based on a large number of asset and consumption items, we create an index of visible wealth by aggregating visible goods and assets using principal component weights. We show that relative deprivation in visible wealth has a significantly stronger effect than income in determining levels of perceived relative deprivation. The finding is robust under various sensitivity checks and for a number of controls. Our result sheds light on the importance of the visibility of the objects of comparison on an individual’s assessment of the own relative economic situation and proposes that future research should not only rely on income-based deprivation measures.