Earning and Conversion Handicaps and the Welfare Economics of Disability

Sen (2004) has distinguished between two types of handicap that are commonly associated with disabilities, viz. an ‘earning handicap’ and a ‘conversion handicap’. In this article, these concepts are considered, extended, and developed conceptually within the framework of a Grossman-type model. This model is then used to consider how the welfare implications of disability and the attendant handicaps may be conceived. A utilitarian framework of the kind associated with conventional welfare economics is invoked, but extra-welfarist-type policies are also discussed. The article shows how the concepts of disability and handicap may be given a tractable conceptual economic basis, and how the welfare effects of social policies towards people with disabilities can usefully be analysed within the resulting framework. © 2008, Cambridge University Press. All rights reserved.