Conversion efficiency as a complementing measure of welfare in capability space

Abstract

In the capability literature, studies on the empirical measurement in the functionings space are abundant and a few studies even measure capability to function. We suggest adopting a third measure of welfare relevant to economists, namely the 'conversion efficiency' measuring the efficiency with which individuals convert their resources into achieved functioning. We use a nonparametric efficiency procedure and construct such a measure for a basket of basic functioning achievement, using data from the British Household Panel Survey (BHPS).