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 probablythe world’s most extracted raw material. The agriculture sector is one of the biggestusers of groundwater resources for irrigation activities, and it plays an important role in thedepletion of these resources. The estimation of demand function for groundwater resourcesis the first step toward any policy recommendation in this field of research. However, onlyscarce attention has been given to empirical studies of the demand structure of groundwaterresources by the help of econometrics and considering the quality of the resources in thecontext of a single aquifer. Therefore, an empirical estimation of the demand function forindividual users which considers water quality enhances further economic analysis and resultsin better policy recommendations. In this study, we have analysed the economic factors andthe groundwater quality as influencing variables on derived demand function for irrigationwater 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 functionhas been applied for the estimation of the derived demand function for groundwater in pistachioproduction and its shadow price. The spatial econometrics has been applied to correctthe results. Results show that water pumping costs are much less than their shadow prices.