The Paradox of Redistribution and Strategies of Equality: Welfare State Institutions, Inequality, and Poverty in the Western Countries

Abstract

the structure of welfare state institutions. (2) A trade-off exists between the degree of low-income targeting and the size of redistributive budgets. (3) Outcomes of market-based distribution are often more unequal than those of earnings-related social insurance programs. We argue that social insurance institutions are of central importance for redistributive outcomes. Using new data, our comparative analyses of the effects of different institutional types of welfare states on poverty and inequality indicate that institutional differences lead to unexpected outcomes and generate the paradox of redistribution: The more we target benefits at the poor and the more concerned we are with creating equality via equal public transfers to all, the less likely we are to reduce poverty and inequality. Social scientists and social reformers have long debated how the welfare state and social policies should be designed so as to best reduce poverty and inequality. This debate involves two different issues. One question concerns whether social policies should be targeted or universal, that is, should they be organized for the poor only or should the welfare state include all citizens? In the context of nontargeted programs, another question concerns the level of benefits: Should benefits be equal for all, or should they be related to previous earnings and in