Working Paper
What Money Can't Buy

This paper relates Amartya Sen’s capability approach to the literature on equivalence scales. Synthetic indicators of well-being are constructed by adjusting individual incomes for differences in functionings. An exploratory comparative application to Italian and Belgian data illustrates the model while disclosing the apparent relative contributions of monetary and non-monetary factors to changes in the functionings’ level. The results suggest that income as such cannot take us very far in evaluating achievements, on account of the effect of some non-monetary factors. Further, they hint at the inappropriateness of the assumption that any dissimilarity among individuals may be efficiently dealt with by a suitable monetary compensation.