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

Author

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  • Tania Burchardt
  • Asghar Zaidi

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.

Suggested Citation

  • Tania Burchardt & Asghar Zaidi, 2003. "Comparing incomes when needs differ: Equivalisation for the extra costs of disability in the UK," CASE Papers case64, Centre for Analysis of Social Exclusion, LSE.
  • Handle: RePEc:cep:sticas:case64
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    File URL: http://sticerd.lse.ac.uk/dps/case/cp/CASEpaper64.pdf
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    References listed on IDEAS

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    1. Coulter, Fiona A E & Cowell, Frank A & Jenkins, Stephen P, 1992. "Differences in Needs and Assessment of Income Distributions," Bulletin of Economic Research, Wiley Blackwell, vol. 44(2), pages 77-124, April.
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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, March.
    2. repec:ris:badest:0579 is not listed on IDEAS
    3. 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).
    4. Wilkinson-Meyers, Laura & Brown, Paul & McNeill, Robert & Patston, Philip & Dylan, Sacha & Baker, Ronelle, 2010. "Estimating the additional cost of disability: Beyond budget standards," Social Science & Medicine, Elsevier, vol. 71(10), pages 1882-1889, November.

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