Using compensating variation to measure the costs of child disability in the UK

The objective of disability policy is to create a society where people with disabilities and their families enjoy an equal standard of living to those without disabilities, though evidence to underpin policy is sparse. We defined the compensating variation (CV) of child disability as the amount of additional income a family with a disabled child would require to achieve the same living standards as a similar family without a disabled child. The aims of this study were to estimate the CV for child disability and to explore how this varied for different levels of disability and reference levels of living standards. Using data on 54,641 families from the Family Resources Survey (2004–2012), we matched families with (cases) and without (controls) a disabled child on family and child characteristics plus living standards and calculated the income difference inclusive of disability benefits. Our findings suggest that across families with the most disabled children, a compensating variation equal to an extra £56–£79 a week was required to achieve the same living standards as matched families without a disabled child compared with the mean level of state disability benefit £47–£71 a week in this group. ELECTRONIC SUPPLEMENTARY MATERIAL: The online version of this article (doi:10.1007/s10198-017-0893-7) contains supplementary material, which is available to authorized users.