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Comparing incomes when needs differ: Equivalisation for the extra costs of disability in the UK

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  • Tania Burchardt
  • Asghar Zaidi
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    Abstract

    Equivalisation of incomes for household size and composition is accepted practice when measuring poverty and inequality; adjustments to take account of other variations in needs are rarely made. This paper explores the financial implications of one possible source of additional needs: disability. Using two UK household surveys, we seek to establish whether there are extra costs of living associated with disability, and to quantify them using the 'standard of living' approach. The underlying theory is that a household's standard of living is a function of income and needs. The extra costs of disability can be derived by comparing the standard of living of households with and without disabled members at a given income, having controlled for other sources of variation. Results show that the extra costs of disability are substantial, especially for disabled people living alone, and that these costs rise with severity of disability. To bring out the policy implications of these results, we compare and contrast three different income distributions which differ in their adjustment for the extra costs of disability, for the population as a whole and for various subgroups. We find that unadjusted incomes significantly understate the problem of low income amongst disabled people, and thereby in the population as a whole.

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    File URL: http://sticerd.lse.ac.uk/dps/case/cp/CASEpaper64.pdf
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    Bibliographic Info

    Paper provided by Centre for Analysis of Social Exclusion, LSE in its series CASE Papers with number case64.

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    Date of creation: Feb 2003
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    Handle: RePEc:cep:sticas:case64

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    Web page: http://sticerd.lse.ac.uk/case/_new/publications/default.asp

    Related research

    Keywords: Equivalisation; disability; standard of living; income distribution;

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    1. Praag, B.M.S. van & Kapteyn, A.J., 1976. "A new approach to the construction of family equivalence scales," Open Access publications from Tilburg University urn:nbn:nl:ui:12-361896, Tilburg University.
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    Cited by:
    1. Giuliana Parodi & Dario Sciulli, 2012. "Disability and low income persistence in Italian households," International Journal of Manpower, Emerald Group Publishing, vol. 33(1), pages 9-26, June.
    2. Shawn Fremstad, 2010. "A Modern Framework for Measuring Poverty and Basic Economic Security," CEPR Reports and Issue Briefs 2010-12, Center for Economic and Policy Research (CEPR).

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