The role of water market in improving the economic value of agricultural water resources

Document Type : Research Paper

Authors

1 Department of Irrigation and Reclamation Engineering, University of Tehran, Karaj, Iran.

2 Department of Environmental Sciences and Technologies, Faculty of Energy and Sustainable Resources Engineering, University of Tehran, Tehran, Iran.

10.22059/jwim.2025.378080.1167

Abstract

The main purpose of this article was to estimate the economic value of agricultural water resources by considering the role of the water market, which has been done in international articles and researches to investigate the role of the water market in the optimal allocation of water resources, the feasibility of setting up and investigating the efficiency of the water market, and investigating the economic dimensions of the market. Water and its effect on the interests of farmers have also been investigated as four main parts of this research. For this purpose, based on the information of the crop year 2018-2019 and the descriptive data obtained from interviews with farmers and experts on the cultivation pattern of agricultural products in the region, the amount of available water resources, the amounts used for production inputs and the water input demand function were obtained. Then, based on the positive mathematical programming model and the maximum entropy approach, an optimization model was coded with the aim of maximizing the profit of the farmers in the region in the presence of the water market in the closed GAMS Software environment. After forming a Linear Programming Model with the aim of maximizing the regional production efficiency of farmers and solving the optimization problem, the shadow price of water input in Eshtehard plain, Iran, was obtained as 18760 Rials per cubic meter. Then, by adding the possibility of water exchange to the model, the area under cultivation of crops was calculated in the presence of a water market. The results showed that the existing difference between the shadow price of water input and the selling price of agricultural water has caused a decrease in the productivity of agricultural water. The absolute values ​​of the price elasticity of demand for water input for wheat, barley and alfalfa products were obtained as 1.42, 1.36 and 1.35 respectively. According to the negative values ​​of demand elasticity in the production of crops in Eshtehard plain, it can be concluded that agriculture in the region has high elasticity with respect to water Input. Therefore, the use of price policies such as the water market by affecting the amount of demand for this input by the farmers of the region will save water consumption and plant crops with less water requirement and increase the economic value of agricultural water and the total profit of farmers to the amount of 4.35%. The existence of a gap between the supply capacity and the intensity of water demand due to the limited resources and the increasing growth of water demand along with the growth of the urban population indicates the importance that this increase in water demand has created a crisis and is considered one of the biggest challenges for humanity in the current century and can be the beginning of many positive and negative developments in the future of the world.

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Main Subjects

References

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Water and Irrigation Management
Volume 15, Issue 1
May 2025
Pages 55-73

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