Estimation of Shadow Price and External Cost of Groundwater Salinity in Agricultural Sector

The use of groundwater resources for agricultural purposes has led to an excessive withdrawal of aquifers and a reduction in groundwater levels in Iran. This issue has increased the salinity and has seriously threatened the agricultural production farms. Therefore, it is important to measure the cost of pollution caused by the production of different products and determine their shadow value. For this purpose, the shadow price of groundwater salinity in different provinces has been estimated during the period of 1964-1999.

In this study, directional output distance function in the quadratic form was used to determine the environmental efficiency and shadow price of groundwater salinity.

The technical inefficiency and shadow value of salinity of the provinces was estimated in the agricultural activity. The results show that the provinces of the country have different conditions in terms of technical inefficiency. The average value of the directional output distance function of Iran is 0.228. Also, the average shadow value of salinity in the groundwater of Iran is 0.278 billion Rials per μS⁄cm.

It is suggested that policies should be developed to control the salinity of groundwater, taking into account the characteristics of each region, and priority should be given to provinces with less shadow prices.