Applying a Nonparametric Efficiency Analysis to Measure Conversion Efficiency in Great Britain

Abstract

In the literature on Sen’s capability approach, studies focussing on the empirical measurement of conversion factors are comparatively rare. We add to this field by adopting a measure of "conversion efficiency" that captures the efficiency with which individuals convert their resources into achieved functioning. We use a nonparametric efficiency procedure borrowed from production theory and construct such a measure for a set of basic functionings, using data from the wave 2006 of the British Household Panel Survey (BHPS). In Great Britain, 49.88% of the individuals can be considered efficient while the mean of the inefficient individuals reaches one fifth less functioning achievement. An individual’s conversion efficiency is positively affected by getting older, being self-employed, married, having no health problems and living in the London area. On the other hand, being unemployed, separated/divorced/widowed and (self-assessed) disabled decrease an individual’s conversion efficiency.

Keywords: conversion efficiency, welfare measurement, robust nonparametric efficiency analysis, functioning production

JEL Classification: I12, I31, R15