Estimating the shadow prices of pollutants in dairy farms of Sarab County using parametric output distance function

In recent years, due to increasing attention to environmental problems, undesirable outputs incorporated in production functions with desirable outputs in researches; this is done by output distance function.
The objective of this research is estimating the shadow price of pollutants produced in dairy farms.
In this study, output distance function estimated for dairy farms in Sarab, which 51 samples were selected among all farms (109 farms) using random sampling; then shadow prices of pollutants (Nitrogen and Phosphorus) calculated.
Average shadow prices of Nitrogen and Phosphorus calculated 30 and -6.5 million of Rls per ton of Nitrogen and Phosphorus, respectively. Results show that it is possible to increase farmer’s revenue by disposing one ton of nitrogen. Negative shadow price for Phosphorus shows that disposing each ton of Phosphorus from production process is equivalent to ignorance of 6.5 million Rls of revenue.
It is suggesting that in order to maximize production and minimize pollution, achieve a desirable nutrition and balanced diet by observing technical and economic principles of optimal input combination and dietary nutrition.