Comparison of methods for the valuation of irrigation water: case study from Qazvin, Iran

Physical availability and adequate distribution of irrigation water are two globally pressing resource management issues. In the long run, the design of irrigation infrastructure should be based on the economic value of irrigation water, taking into account a full analysis of all associated costs and benefits. In the absence of water markets, non-market valuation methods need to be employed to assess the economic value of irrigation water. A multitude of valuation methods are available, which often differ substantially in their results. We compare three different methods using primary data collected from the Qazvin irrigation network in Iran. We compare economic values based on contingent valuation (197 rial m‾3), the value of marginal product (430/476 rial m‾3 depending on functional form assumptions), and change in net rent (1080 rial m‾3). The hypothetical nature of the contingent valuation and the presence of strategic responses may have resulted in understatements of the true water values. Thus, a stochastic frontier analysis was used to correct for undervaluation bias, which is estimated at 272 rial m‾3. Our results suggest that actual water prices fall substantially short of the estimated economic values in the Qazvin irrigation network: higher water prices would hence improve the allocation of water.