Twenty years after Korpi and Palme's "paradox of redistribution". What have we learned so far, and where should we take it from here?

Abstract

Some 20 years ago, Korpi and Palme (1998) published one of the most influential papers in the history of social policy discipline, in which they put forward a “paradox of redistribution”: the more countries target welfare resources exclusively at the poor, the less redistribution is actually achieved and the less income inequality and poverty are reduced. The current paper provides a state-of-the-art review of empirical research into that paradox. More specifically, we break down the paradox into seven core assumptions, which together form a causal chain running from institutional design to redistributive outcomes. For each causal assumption, we offer a comprehensive and critical review of the relevant empirical literature, also including a broader range of studies that do not aim to address Korpi and Palme’s paradox per se, but are nevertheless informative about it. Our main contribution is that we move beyond a simple test of the “end product” (i.e., Are universal systems more effective in reducing poverty and income inequality?) to a much more sophisticated examination of the underlying, in-between mechanisms of the paradox of redistribution. In doing so, we respond to Korpi and Palme’s call to “open the black box of causal processes assumed to mediate the effects from institutions to redistributive outcomes” (1998:673). Our review shows that the only unequivocally supported assumption is that higher welfare spending is associated with lower levels of poverty and inequality, but even in this regard there is some indication that countries can compensate for lower spending by more-accurate targeting of low-income families. There is also ample evidence that the first stages of the causal chain – institutional structures of the welfare state influencing the formation of class coalitions and the latter affecting the size of the redistributive budget – are simply not correct, as class coalitions do not seem to differ between welfare regimes. Perhaps one of the main drawbacks of Korpi and Palme’s paradox of redistribution is thus that its very foundations were taken for granted based on theoretical reasoning instead of empirical material.status: Published onlin