Abstract for: The Paradox of Redistribution: A System Dynamics Translation

Inequality has received renewed attention in the public as well as the academic debate. One theory is that the development of redistribution and inequality reflects the initial structure of the social insurance institutions. Countries with social insurance institutions that target the poor and low-income earners result in smaller redistributive budgets and higher levels of poverty than countries with social insurance institutions with lower levels of low-income-targeting. This seems to be because inequality- and poverty rates are more dependent on the total size of the redistributive budget than to what extent the system targets the poor. This has been referred to as the paradox of redistribution. In this paper, the paradox of redistribution is translated to system dynamics to test the theory’s predictive claims. The system dynamics translation results in a model that reproduces the reference modes. System dynamics should have a profound role in the discussions of inequality, as a tool to explain and discuss concepts and in suggesting structural explanations with an endogenous point of view.