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

  • Marx, Ive

    ()

    (University of Antwerp)

  • Salanauskaite, Lina

    ()

    (University of Antwerp)

  • Verbist, Gerlinde

    ()

    (University of Antwerp)

Registered author(s):

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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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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  1. 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.
  2. L. Randall Wray & Stephanie Bell, 2004. "Introduction," Chapters, in: Credit and State Theories of Money, chapter 1 Edward Elgar.
  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. Rainald Borck, 2007. "Voting, Inequality And Redistribution," Journal of Economic Surveys, Wiley Blackwell, vol. 21(1), pages 90-109, 02.
  6. Erling Barth & Karl O. Moene, 2009. "The Equality Multiplier," NBER Working Papers 15076, National Bureau of Economic Research, Inc.
  7. 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).
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