Dreaming Rich: How inequality sustains itself through motivated beliefs

We propose and test a novel mechanism through which inequality sustains itself: when inequality rises, the greater rewards at the top motivate people to become more optimistic about their economic prospects. Based on a conceptual framework, we conduct an online experiment where participants experience different levels of initial inequality, form beliefs about reaching the top position, and make income allocation decisions. In line with theoretical predictions, the results show that: (1) high inequality exposure significantly increases confidence in reaching the top; (2) this overconfidence increases inequality acceptance, leading to more unequal allocations; and (3) these effects persist even with accurate relative performance feedback. Our analysis of cross-country survey data complements these experimental results: citizens in more unequal societies display greater optimism about upward mobility despite lower actual mobility, and this overconfidence correlates with reduced redistribution support.