Judhajit Chakraborty is a Ph.D. Candidate at the Department of Agricultural, Food, and Resource Economics at Michigan State University, USA. His research focuses on applied microeconomics, specifically at the intersection of environment, agriculture, and political economy.
Perceptions of relative deprivation reflect whether individuals or households feel they are economically worse off than others in a given reference group. Such perceptions or feelings of relative poverty or disadvantage are a precursor to key outcomes like fairness views on inequality, shifts in political attitudes, support for redistribution, hostility, and aggressive behavior, among others. Emerging studies on perceived relative deprivation (Kosec et al., 2021; Kosec and Mo, 2021) in developing countries are largely based on experimental setups. Related literature on perceptions of social positions in developed countries also uses experimental variations alongside custom surveys and administrative records and attributes household-specific (i.e., idiosyncratic) shocks to changes in perceptions of social positions (Hvidberg, 2020). However, experimental setups only temporarily create perceptions of relative deprivation, and we still know little about the drivers of perceived relative deprivation, especially in the context of developing countries with non-experimental setups.
In my job market paper, I test whether covariate shocks like excess rainfall can shape perceptions of relative deprivation using observational data in Peru. Compared to idiosyncratic shocks (e.g., unemployment, disability, hospitalization, or promotion), covariate shocks are more widespread, and all households within a community may be affected. Thus, their effect on perceived relative deprivation may not be as straightforward as in the case of household-specific shocks. With the increasing frequency and intensity of extreme weather events due to climate change, it is essential to study whether such events could shape perceptions of relative deprivation. This is critical in the context of Peru, a country with persistently high economic inequality (World Inequality Database) and one of the most vulnerable countries to climate change in the world (Stern, 2007; Tambet & Stopnitzky, 2021).
I use household-level longitudinal data from the Peruvian National Household Survey (Encuesta Nacional de Hogares – ENAHO). Specifically, I use an unbalanced panel of over 44,000 households between 2007-2019, spread across all regions of Peru. I construct a simple binary measure of perception of relative deprivation, which takes value one if households perceive their standard of living is worse compared to other households in its locality or community, and zero if households perceive their standard of living is the same or better compared to the other households in their locality or community. My identification strategy exploits within-household variation over time, comparing outcomes in years with excess rainfall shocks relative to periods with relatively average weather patterns. I provide novel empirical evidence that exposure to excess rainfall shocks increases the likelihood of households perceiving their standard of living to be worse off relative to other households in the locality or community. For example, I find that positive deviations in rainfall from the long-run mean by more than 2.5 times the long-run standard deviation increase the likelihood of perceived relative deprivation by 1.25 percentage points (approximately a 6.2% increase). Using baseline poverty status (a measure of economic vulnerability), I find that both poor and non-poor households perceive relative deprivation in the face of a shock. However, the effect on non-poor households are smaller.
What could explain this?
First, changes in perceptions of relative deprivation could be an artifact of actually (i.e., objectively) widening economic gaps. I use the household’s baseline poverty status to show that poorer households suffer a large decline in consumption when exposed to a shock. This differential effect suggests that the excess rainfall shocks widen the economic gap within localities, and this is also reflected in the standard measures of relative deprivation, such as Yitzhaki or Stark indexes (Yitzhaki, 1979 and Stark, 1984). Intuitively, these measures capture the cumulative difference between the consumption of a household and those having higher consumption levels within a reference group. Overall, while the widening economic gap could explain perceived relative deprivation for poor households, it does not fully explain increases in perceptions of relative deprivation amongst the better-off or non-poor households.
Second, perceptions of relative deprivation could be guided by misperceptions about the losses of other households within a locality (i.e., misperceptions about the losses of others even when potentially all households within a locality are affected similarly). To corroborate this, I first show that excess rainfall shocks negatively affect neighbors’ consumption (measured by leave one-out average household per capita expenditure), suggesting other households are also negatively affected in terms of consumption losses, and reflecting the covariate nature of the shock. Further, I test whether a given household, in the face of a shock, is more likely to perceive that the standard of living of others in their locality has remained the “same” or “got better” in the course of the last year. I find empirical support for this; I show that exposure to excess rainfall shock reduces the likelihood of reporting that other households in their community are “worse-off” by 0.66 percentage points. This indicates that households might underestimate their neighbors’ losses.
Can social policies attenuate perceptions of relative deprivation?
I explore the role of social protection programs in mitigating perceived relative deprivation. For this, I examine access to a large conditional cash transfer program (Juntos) and public food assistance programs. I identify households with access to Juntos or food assistance programs at the baseline year of the survey. I find that non-beneficiary households were more likely to perceive relative deprivation in the face of an excess rainfall shock than beneficiary households. Thus, cash and in-kind transfer programs could be vital in helping mitigate perceptions of relative deprivation as households experience extreme excess rainfall.
The findings are robust to alternate shock measures and different harmful thresholds. My results are also qualitatively similar when I measure the shocks based on national reports of heavy rainfall-related emergencies (e.g., floods, mudslides, and landslides).
Implications for Policy and Relevance
Finally, I find that households perceiving relative deprivation are more likely to report democracy functions “poorly” or “very poorly” in Peru. Additionally, these households are more likely to prefer “authoritarian regimes over democratic ones, in some circumstances.”. Low levels of political trust or lack of confidence in public institutions affect policy preferences, compliance with law and civic participation, conflict, and other key outcomes (Citrin and Stoker, 2018 and Buhaug et al., 2015). These could be especially important in countries with political instability or a history of military or authoritarian rule. These results provide crucial evidence on how increasingly severe weather shocks may shape perceptions of relative deprivation and how it can further shape political beliefs. Social programs can attenuate some of these impacts.
Q: How did you come up with your research idea and which challenges did you face?
In my personal experiences, I have seen that in the incident of an extreme event (for example, a pandemic or a natural disaster), people may perceive themselves to be worse off than others, even when everyone in the vicinity has been affected similarly. In my training for economic research, I have observed that such subjective perceptions of reality are less studied because they are often difficult to measure. This motivated me to explore this area more. However, my main challenge was finding a suitable measure for perceived relative deprivation, especially given a non-experimental setting. I have been working on Peru for a while now and started studying the survey instruments for Peruvian data (in Spanish) using the Google Translate feature, which eventually helped me come up with a measure of perceived relative deprivation. Thus, I would like to emphasize that one of the best ways to understand survey data is to start by carefully reading the survey instrument. I have also gained enormously by referring to the grey literature to better understand the context of extreme events in Peru.
