An Econometric Estimation of Irrigation Water Demand for Watermelon in Iran

• Main Authors: Ahmad Sadeghi ,, Mohammad Khodabakhsh,, Ghazali Mohayidin ,, Naser Motiee,, Seyed Reza Nazarihashemi ,
• Format: Article
• Published: 2012
• Subjects: S Agriculture (General)
• Online Access: http://library.oum.edu.my/repository/907/1/018-ICEBM2012-K10001.pdf; http://library.oum.edu.my/repository/907/

. Iran is located in an arid and semi-arid area with scarcity of water resource for its agricultural activities. About 93 percent of the total annual Iranian water consumption is for agricultural activities. Not with standing high irrigation water demand in the agricultural sector, farmers pay very low price for water and the cost borne by farmers for irrigation water is much lower than the actual value of water. The low irrigation fee has caused not only inefficient allocation of water resources in this sector, but it has also resulted in farmers producing crops which require relatively large amount of water as well as non-essential crops. The main objective of this study is to estimate the demand for irrigation water, and to analyze the current pricing mechanism (policy) for water. The demand elasticity of goods, services and input determines which a change in price, ceteris paribus, affects users’ quantity demanded. This study investigated the structure of irrigation water demand by estimating the derived demand for water on a particular crop, watermelon, in Iran. A derived demand function is estimated after performing the relevant statistical tests. The price elasticity of irrigation water demand and other elasticities are also computed. The price elasticity is found significant. Data and information from 2001 to 2006 from 21 provinces in Iran is employed. Parameters for the demand functions were estimated using Ordinary Least Squares (OLS). The parameters of models were estimated using the econometric method on panel data. The estimated water price coefficients are found to be negative which confirm the economic pricing theory. (Abstract by authors)