Welfare Effects of Establishing Agricultural Water Market in Iran

Agricultural water market is considered as an appropriate tool to allocate water resources in an optimal manner and address this crisis among the farmers. Existing irrigation networks in Iran are appropriate instrument to establish this market. This study simulated such market to analysis it's economic and welfare aspects for farmers under irrigation networks in Isfahan City of Iran. We selected a random sample of 141 farmers in this city as study population in 2006-2007. Since the advantages of Positive Mathematical Programming (PMP) in policy analysis, we used this method to simulate and analyze the behavioral responses of farmers to establish this market in studied area. Results showed farmers will increase their gross margin after establishing the water market. It takes place because possibility of decreasing water restriction and changing land allocation among different crops. Moreover, farmers are able to optimize water usage and sell their surplus or buy their deficit water so that their welfare will increase significantly.