Valuation of Water and its Sensitive Analysis in Agricultural Sector A Hedonic Pricing Approach

Abstract

Problem Statement: In the recent decades water scarcity and its impacts on agricultural sectors and food security are growing concerns worldwide. Water scarcity is one the major problem facing agricultural production in Iran. In this context valuation of irrigation water can be suggest as an appropriate solution. Approach: This research based on utilizing hedonic pricing method for estimating effective variables on the value of agricultural lands and used a way, for obtaining the value of irrigation water in Mashhad. Sensitive analysis is also used for observation of varieties in the value of water. Results: Results showed that, irrigation water is the most effective and significant variable in the controversial area. Results of the sensitive analysis indicated that, by increasing discount rate, the value of water increased. Whereas by decreasing period of investment and annual consumption of water, the value of it, decreased. Conclusion: In the case of agricultural lands are allocated to cultivation of valuable crops, discount rate of investment would increase; and also if agricultural lands invested in quick return activities, period of investment decrease. And therefore, the value of irrigation water in m^-3 increases. Results indicated that by decrease of aridity and so increase in water consumption, in a long run period of investment, value of irrigation water decreases.