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The current consensus among comparative political scientists postulates that diverse democracies redistribute less than do homogeneous ones. However, whereas homogeneous democracies do redistribute more on average, diverse democracies exhibit high variation in redistributive outcomes. Why does ascriptive heterogeneity stifle redistribution in some cases but not in others? In this article, it is argued that diversity undermines redistributive outcomes when identity groups differ more starkly in their income levels. More importantly, under these conditions, the policy outcomes are not uniform: rather than general cutbacks, richer groups selectively under‐prioritise benefits and access for poorer, minority‐heavy groups while keeping their own redistributive interests protected. The result is not simply less redistribution aggregately, but a more exclusionary and regressive welfare state that prioritises the special needs of better‐off identity groups. Empirical support is found in these hypotheses using macro‐comparative panel data on multiple redistributive aspects in 22 developed democracies in the years 1980–2011. The article thus outlines a conditional and more nuanced relationship between diversity and redistributive outcomes than commonly assumed, as well as several broader lessons for research of identity politics and social policy.

This study analyzes the affordability and distributional implications of water tariff reforms for poor water customers under means-tested tariffs in comparison to increasing block tariffs (IBTs) using volumetric targeting. For this purpose, we employ a unique data set for Lima, Peru. Our analysis reveals that from a pro-poor perspective, the performance of means-tested tariffs is mixed. On the one hand, they distribute more income to poor households than the IBTs, given the assumption that the overall revenue to the water supplier remains constant. On the other hand, the share of poor customers who actually benefit from water subsidies declines with means-testing. Nevertheless, means-tested tariffs clearly outperform IBTs in terms of excluding non-poor customers from being subsidized. These findings should be generalized with care as the performance of the tariff crucially depends on the cut-off value for cross-subsidies and the block prices chosen under volumetric targeting and on the design of the means-test. Our analysis further suggests that a proper assessment of individual welfare effects should take household size into account and rest on a broad set of affordability and distributional indicators. Interestingly, our results are relatively insensitive to the price elasticity of water demand.