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The Paradox of Redistribution Revisited: And That It May Rest in Peace?

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  • Marx, Ive

    ()
    (University of Antwerp)

  • Salanauskaite, Lina

    ()
    (University of Antwerp)

  • Verbist, Gerlinde

    ()
    (University of Antwerp)

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Abstract

There is a long-standing controversy over the question of whether targeting social transfers towards the bottom part of the income distribution actually enhances or weakens their redistributive impact. Korpi and Palme have influentially claimed that "the more we target benefits at the poor, the less likely we are to reduce poverty and inequality". The basic empirical underpinning of this claim is a strong inverse relationship at the country level between social transfer targeting and redistributive impact. We show that this no longer holds as a robust empirical generalisation. The relationship between the extent of targeting and redistributive impact over a broad set of empirical specifications, country selections and data sources has in fact become a very weak one. For what it matters, targeting tends to be associated with higher levels of redistribution, especially when overall effort in terms of spending is high. We try to make substantive sense of this breakdown of the originally established relationship by focusing on two questions: first, what has changed in the countries originally included in the study and, second, what is different about the countries now additionally included in the analysis?

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 7414.

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Length: 51 pages
Date of creation: May 2013
Date of revision:
Handle: RePEc:iza:izadps:dp7414

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Keywords: targeting; tax benefit policies; redistribution; inequality;

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References

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  1. Rainald Borck, 2007. "Voting, Inequality And Redistribution," Journal of Economic Surveys, Wiley Blackwell, vol. 21(1), pages 90-109, 02.
  2. Eichhorst, Werner & Gerard, Maarten & Kendzia, Michael J. & Mayrhuber, Christine & Nielsen, Conny & Rünstler, Gerhard & Url, Thomas, 2011. "Report No. 42: Pension Systems in the EU – Contingent Liabilities and Assets in the Public and Private Sector," IZA Research Reports 42, Institute for the Study of Labor (IZA).
  3. David Brady & Rebekah Burroway, 2012. "Targeting, Universalism, and Single-Mother Poverty: A Multilevel Analysis Across 18 Affluent Democracies," Demography, Springer, vol. 49(2), pages 719-746, May.
  4. Eichhorst, Werner & Konle-Seidl, Regina, 2008. "Contingent Convergence: A Comparative Analysis of Activation Policies," IZA Discussion Papers 3905, Institute for the Study of Labor (IZA).
  5. Sean Corcoran & William N. Evans, 2010. "Income Inequality, the Median Voter, and the Support for Public Education," NBER Working Papers 16097, National Bureau of Economic Research, Inc.
  6. Erling Barth & Karl O. Moene, 2009. "The Equality Multiplier," NBER Working Papers 15076, National Bureau of Economic Research, Inc.
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Citations

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Cited by:
  1. Carlos Farinha Rodrigues & Isabel Andrade, 2013. "Robin Hood versus Piggy Bank: Income redistribution in Portugal 2006-10," Working Papers Department of Economics 2013/28, ISEG - School of Economics and Management, Department of Economics, University of Lisbon.
  2. Sarah Marchal & Mechelen, N. van, 2013. "GINI DP 87: Activation strategies within European minimum income schemes," GINI Discussion Papers 87, AIAS, Amsterdam Institute for Advanced Labour Studies.
  3. Ive Marx & Brian Nolan & Javier Olivera, 2014. "The Welfare State and Anti-Poverty Policy in Rich Countries," Working Papers 1403, Herman Deleeck Centre for Social Policy, University of Antwerp.
  4. Wim Van Lancker & Natascha Van Mechelen, 2014. "Universalism under siege? Exploring the association between targeting, child benefits and child poverty across 26 countries," Working Papers 1401, Herman Deleeck Centre for Social Policy, University of Antwerp.
  5. Bea Cantillon & Natascha Van Mechelen, 2013. "Poverty reduction and social security: Cracks in a policy paradigm," Working Papers 1304, Herman Deleeck Centre for Social Policy, University of Antwerp.
  6. Healy, D. & Mulcahy, A. & O'Donnnell, I., 2013. "GINI DP 93: Crime, Punishment and Inequality in Ireland," GINI Discussion Papers 93, AIAS, Amsterdam Institute for Advanced Labour Studies.
  7. Gerlinde Verbist & Francesco Figari, 2013. "GINI DP 88: The redistributive effect and progressivity of taxes revisited: An International Comparison across the European Union," GINI Discussion Papers 88, AIAS, Amsterdam Institute for Advanced Labour Studies.

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