Economics

Does knowing more about finance lead to making better investment decisions?

It might if you believe a working paper from the US National Bureau of Economic Research, published yesterday. By matching records from an unnamed company’s pension scheme and responses to a survey asking some basic questions about finance, they “find that risk-adjusted annual expected returns are 130 basis points higher for the most financially knowledgeable employees.” The questions used in the survey can be found in the quiz below. Read more

The Office for National Statistics has, for the first time, included estimates of the impact of prostitution and illegal drugs in the national accounts. By the ONS’ reckoning they add about £10bn to the British economy.

Estimates of anything to do with the black economy are always going to be uncertain at best, but the statistics available are pretty interesting. Read more

Before a measure of inequality can be calculated there are some questions that need to be answered: Chiefly, equality of what? Living standards? Wealth? Income? Or, perhaps, opportunity?

And what do you include? Is income measured before tax and benefits, or after? Do you include public goods in measures of living standards? How do you account for public assets and debts in wealth?

And who are the relevant people? The whole world or one country? Do you include students and children or just adults of working age?

The level of inequality measured will always depend on how these questions are answered.

The British Wealth and Assets survey, released today, provides measures of inequality in private wealth (so not including public debts and assets) between different households.

And households come in different shapes and sizes.

Individuals who are married or widowed are the most likely to live in a wealthier household. Whereas those who are separated, divorced or single are the least likely.

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Wage growth has risen by more than inflation for the first time since 2010 and employment has grown by the largest amount for 24 years, according to figures released by the ONS today.

Given this context its worth taking a look at the performance of Britain’s labour market since the 2008 financial crisis.

1. Despite lacklustre GDP growth employment has been steadily increasing since 2010. Read more

By Paul Hodges

The toy industry is going through difficult times as Lex highlighted recently. Profits at Toys R Us have halved since 2009, whilst Mattel is suffering due to poor sales of Barbie dolls. A dismal Christmas at the UK’s Mothercare led the departure of its chief executive. Read more

The New York Times asked yesterday whether Americans with a car in the driveway, a flat-screen television and a computer with an Internet connection can be described as “poor”.

In the United States, material goods – televisions, computers and cars – are at their most affordable in ten years, all having steadily dropped in price since 2005.

However, the cost of items that have traditionally helped pull Americans out of poverty – education, childcare and healthcare – have become far more expensive. Families’ everyday expenses also remain under strain from a steady increase in the cost of food and little change in the price of housing.

What would the same analysis of the cost of living look like in the UK?

We created a UK version of the chart in the New York Times’ story, using real prices calculated from the British consumer price index. The story was pretty similar:

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