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The idea of targeting within universalism has been evoked frequently, usually as a best of both worlds' strategy. The approach remains difficult to identify, however, because targeting is usually measured as the opposite of universalism. This article proposes to consider targeting and universalism as two distinct dimensions of the welfare state, the opposite of universalism being more usefully understood as residualism, and not as pro-poor targeting. Four welfare state possibilities then emerge, combining a position on the universalism/residualism axis and one on the pro-poor/pro-rich axis: universalism (France, for instance), targeting within universalism (Denmark), targeting within residualism (the United States) and pro-rich residualism (Japan). We show that targeting within universalism entails pro-poor targeting without means testing, a combination that can be achieved with limits on the earnings-relatedness of the pension system and generous transfers to the working age population. Thus understood, targeting within universalism proves to be an effective redistributive strategy, better to redistribute than mere targeting, and less costly than universalism pure and simple.

In 1998, Walter Korpi and Joakim Palme proposed a political and institutional explanation to account for the greater redistributive success of welfare states that relied more on universal than on targeted programmes. Effective redistribution, they argued, resulted less from a Robin Hood logic – taking from the rich to give to the poor – than from a broad and egalitarian provision of services and transfers. Hence, the paradox: a country obtained more redistribution when it took from all to give to all than when it sought to take from the rich to help the poor. Recent studies, however, failed to confirm the existence of this paradox. This article suggests that the original argument was theoretically sound but inadequately operationalized. Korpi and Palme measured universalism indirectly, not by the design or character of social programmes, but rather by their outcomes, namely, by their income effects. These outcomes, however, are influenced by exogenous factors. We use two new Organisation for Economic Co-operation and Development (OECD) indicators to capture universalism directly, through the institutional design of social programmes: (1) the percentage of social benefits that are means or income tested and (2) the proportion of private spending in total social expenditures. These two indicators are combined into a universalism index and tested with a time-series cross-sectional design for 20 OECD countries between 2000 and 2011. This approach, we argue, better captures institutional design, in a way that is consistent with Korpi and Palme's original argument, and it suggests that there is still a paradox of redistribution in the 21st-century welfare state.