Disability costs and equivalence scales in the older population in Great Britain

Marcello Morciano, Ruth Hancock, Stephen Pudney

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Abstract

We use a standard of living (SoL) approach to estimate older people's disability costs, using data on 8000 individuals from the U.K. Family Resources Survey. We extend previous research in two ways. First, by allowing for a more flexible relationship between SoL and income, the structure of the estimated disability cost and equivalence scale is not dictated by a restrictive functional form assumption. Second, we allow for the latent nature of disability and SoL, addressing measurement error in the disability and SoL indicators in surveys. We find that disability costs are strongly related to severity of disability, and vary with income in absolute and proportionate terms. Older people above the median disability level require an extra £99 per week (2007 prices) on average to reach the SoL of an otherwise similar person at the median. Costs faced by older people in the highest decile of disability average £180.
Original languageEnglish
Pages (from-to)494–514
Number of pages21
JournalReview of Income and Wealth
Volume61
Issue number3
Early online date20 Jan 2014
DOIs
Publication statusPublished - Sep 2015

Keywords

  • C81
  • D10
  • I10
  • Costs of disability
  • disability indexes
  • equivalence scale
  • standard of living
  • structural equation modeling

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