Demand for Irrigation Water for Pistachio Production from Depleting Groundwater Resources: Spatial Econometric Approach

Depletion of groundwater resources is an international problem, and groundwater is probably the world’s most extracted raw material. The agriculture sector is one of the biggest users of groundwater resources for irrigation activities, and it plays an important role in the depletion of these resources. The estimation of demand function for groundwater resources is the first step toward any policy recommendation in this field of research. However, only scarce attention has been given to empirical studies of the demand structure of groundwater resources by the help of econometrics and considering the quality of the resources in the context of a single aquifer. Therefore, an empirical estimation of the demand function for individual users which considers water quality enhances further economic analysis and results in better policy recommendations. In this study, we have analysed the economic factors and the groundwater quality as influencing variables on derived demand function for irrigation water in the pistachio production of the Rafsanjan aquifer in the southeastern part of Iran. The field study was conducted from November 2008- February 2009. Translog cost function has been applied for the estimation of the derived demand function for groundwater in pistachio production and its shadow price. The spatial econometrics has been applied to correct the results. Results show that water pumping costs are much less than their shadow prices.