More than 20 years ago Korpi and Palme (1998) pointed to the existence of the “Paradox of redistribution”, showing that tightly targeted welfare systems are less effective in reducing poverty and inequality, compared to more universal ones. In this thesis I focus on the question: “Why does disadvantage persist despite the presence of policies targeted specifically to the disadvantaged?”. I consider two micro-level mechanisms. First, tying together welfare and work through Active Labour Market Policies might make past welfare use more salient to employers, and participants in activation programs could become a target for discrimination. This mechanism was tested through a field experiment where fictitious resumes were sent to real employers in Italy. Results show that employers discriminate against former participants in the Youth Guarantee subsidised internships. Second, targeting and conditionality could hinder access to welfare among the most vulnerable. This second mechanism was tested through a mixed method study on the homeless in Rome (Italy). The welfare measures considered were the Italian Minimum Income Scheme (Reddito di Cittadinanza), Covid-19 Emergency Payment (Reddito di Emergenza) and Disability Benefit (Invalidità Civile). Administrative errors and benefit sanctions generate a low application success rate for highly targeted conditional benefits. Psychological barriers, such as the perception of stigma and bureaucratic complexity, play a limited role as determinants of willingness to apply. Moreover, applications for tightly targeted benefits depend more on the availability of social contacts, making them less accessible for those more socially excluded. Ultimately, this thesis provides novel evidence on the impact of targeting and conditionality studying two populations that are rarely considered: employers and the homeless. Moreover, it puts a spotlight on the gatekeeping role of employers and the public administration, and shows how targeting and conditionality can contribute to the reproduction of unemployment and extreme poverty.