  Across income groups and countries, individual citizens perceive economic
inequality spectacularly wrong. These misperceptions have far-reaching
consequences, as it is perceived inequality, not actualinequality informing
redistributive preferences. The prevalence of this phenomenon is independent of
social class and welfare regime, which suggests the existence of a common
mechanism behind public perceptions. The literature has identified several
stylised facts on how individual perceptions respond to actual inequality and
how these biases vary systematically along the income distribution. We propose
a network-based explanation of perceived inequality building on recent advances
in random geometric graph theory. The generating mechanism can replicate all of
forementioned stylised facts simultaneously. It also produces social networks
that exhibit salient features of real-world networks; namely, they cannot be
statistically distinguished from small-world networks, testifying to the
robustness of our approach. Our results, therefore, suggest that homophilic
segregation is a promising candidate to explain inequality perceptions with
strong implications for theories of consumption and voting behaviour.
