An information approach to the dynamics in farm income: implications for farmland markets

The valuation of farmland is a perennial issue for agricultural policy, given its importance in the farm investment portfolio. Despite the significance of farmland values to farmer wealth, prediction remains a difficult task. This study develops a dynamic information measure to examine the informational content of farmland values and farm income in explaining the distribution of farmland values over time.

Farm income, population and farmland prices: a relative information approach

This paper uses an entropy-based information approach to determine if farmland values are more closely associated with urban pressure or farm income. The basic question is: how much information on changes in farm real estate values is contained in changes in population versus changes in returns to production agriculture? Results suggest population is informative, but changes in farmland values are more strongly associated with changes in the distribution of returns. However, this relationship is not true for every region nor does it hold over time, as for some regions and time periods changes in population are more informative. Results have policy implications for both equity and efficiency.

The income requirements of marine protected areas

Given the growing impact of human activities on the sea, managers are increasingly turning to marine protected areas (MPAs) to protect marine habitats and species. Many MPAs have been unsuccessful, however, and lack of income has been identified as a primary reason for failure. In this study, data from a global survey of 79 MPAs in 36 countries were analysed and attempts made to construct predictive models to determine the income requirements of any given MPA. Statistical tests were used to uncover possible patterns and relationships in the data, with two basic approaches. In the first of these, an attempt was made to build an explanatory "bottom-up" model of the cost structures that might be required to pursue various management activities. This proved difficult in practice owing to the very broad range of applicable data, spanning many orders of magnitude. In the second approach, a "top-down" regression model was constructed using logarithms of the base data, in order to address the breadth of the data ranges. This approach suggested that MPA size and visitor numbers together explained 46% of the minimum income requirements (P < 0.001), with area being the slightly more influential factor. The significance of area to income requirements was of little surprise, given its profile in the literature. However, the relationship between visitors and income requirements might go some way to explaining why northern hemisphere MPAs with apparently high incomes still claim to be under-funded. The relationship between running costs and visitor numbers has important implications not only in determining a realistic level of funding for MPAs, but also in assessing from where funding might be obtained. Since a substantial proportion of the income of many MPAs appears to be utilized for amenity purposes, a case may be made for funds to be provided from the typically better resourced government social and educational budgets as well as environmental budgets. Similarly visitor fees, already an important source of funding for some MPAs, might have a broader role to play in how MPAs are financed in the future. (C) 2007 Elsevier Ltd. All rights reserved.

Depreciation, income distribution and the UK REIT

Purpose – The purpose of this paper is to consider prospects for UK REITs, which were introduced on 1 January 2007. It specifically focuses on the potential influence of depreciation and expenditure on income and distributions. Design/methodology/approach – First, the ways in which depreciation can affect vehicle earnings and value are discussed. This is then set in the context of the specific rules and features of REITs. An analysis using property income and expenditure data from the Investment Property Databank (IPD) then assesses what gross and net income for a UK REIT might have been like for the period 1984-2003. Findings – A UK REIT must distribute at least 90 per cent of net income from its property rental business. Expenditure therefore plays a significant part in determining what funds remain for distribution. Over 1984-2003, expenditure has absorbed 20 per cent of gross income and been a source of earnings volatility, which would have been exacerbated by gearing. Practical implications – Expenditure must take place to help UK REITs maintain and renew their real estate portfolios. In view of this, investors should moderate expectations of a high and stable income return, although it may well still be so relative to alternative investments. Originality/value – Previous literature on depreciation has not quantified amounts spent on portfolios to keep depreciation at those rates. Nor, to our knowledge, has its ideas been placed in the indirect investor context.

Income differentials and corporate performance

Purpose – This paper seeks to make the case for new research into the perceived fairness and impact of executive pay. Design/methodology/approach – The paper reviews the literature regarding executive compensation and corporate performance and examines the evidence that a more egalitarian approach to pay could be justified in terms of long-term shareholder value. Findings – There would appear to be no evidence to suggest that the growing gap between the pay of executives and that of the average employee generates long-term enterprise value, and it may even be detrimental to firms, if not the liberal capitalist consensus on which the corporate licence to operate is based. Research limitations/implications – The paper outlines a new approach to tracking income differentials with corporate performance through the development of a corporate Gini coefficient “league table”. Social implications – The proposed research is expected to point towards better practice in executive remuneration, and support the growing momentum for a sustainable and enlightened approach to business, in which the key goal is long-term enterprise value based on a fair distribution of the rewards of business. Originality/value – In producing a deeper understanding of the impact of widening income differentials, the paper should be of interest to senior executives in publicly quoted companies as well as press commentators, government officials and academics.