Poverty and Inequality of Standard of Living and Quality of Life in Great Britain

Abstract

Most empirical analyses on inequality and poverty use either income or consumption to approximate the standard of living and/or quality of life of individuals (or households). Notwithstanding this, it is well known that these measures are seriously deficient. Moreover, it is a handicap to be concerned with goods, as such, to the exclusion of what goods “do to human beings” (Sen, 1998, 1999). We take on Sen’s concepts of ‘resources’ and “functionings” and measure poverty and inequality of standard of living and quality of life in Great Britain using the British Household Panel Study (BHPS) data. Sen defines “resources” as the material goods and services, which confer capability on individuals. That is, provide them with the capacity to do things. His concept of “functionings,” however, captures the notion of how well individuals are functioning as human beings. Following Lovell et al. (1994) we use distance functions to estimate standard of living, quality of life and the efficiency in transforming resources into functionings. Standard of living is measured as a mixture of resources by means of an index, which is analogous to the input quantity index of production economics, whereas quality of life gets measured by an index of individual functionings, which is analogous to the output quantity index of production economics. We then analyse the distributions of standard of living and quality of life and their relationship with the efficiency in transforming resources into functionings. We find little correlation between the first two distributions and very low inequality and poverty.