Demand for Irrigation Water from Depleting Groundwater Resources in Pistachio Production, Case Study from Iran

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 plays an important role in the depletion of these resources. Up to now, the main focus of economic studies on groundwater resources has been on comparing two regimes of quantity based management: optimal control and competitive pumping. As a result, the estimation of the demand function for groundwater resources is the first step towards any policy recommendations in this field of research. However, only scarce attention has been given to empirical studies of the demand structure of groundwater resources that use of econometrics and consider the quality of the resources and the spatial effect of groundwater users on each other in the context of a single aquifer. Therefore, an empirical estimation of the demand function for individual users that takes into account water quality and spatial effects of the individual users 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 the 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. A translog cost function has been applied for the estimation of the derived demand function for groundwater in pistachio production and its shadow price. Spatial econometrics has been applied to correct the results. Results show that demand for groundwater is inelastic for changes in pumping costs. It also shows that spatial correlation affects the estimated demand function.