Determining the Economic Value of the Irrigation Water in Production of Wheat in Iran

Water in agricultural productions, particularly in arid and semi arid regions such as Iran is very essential. Water shortage for agricultural crops is an important problem in this areas, and on the other hand exist no defined market for it. So there is not a suitable and efficient price for it. This study investigates the structure of irrigation water demand by estimating the water derived demand for the determination of economic value of irrigation water on a particular crop, wheat, in Iran. The analysis is based on deductive econometric method, by using of total statistic data and panel data. A demand function is estimated for wheat in Iran and after performing the relevant statistical tests, the price elasticity of irrigation water demand is obtained. Then we used of this price elasticity for determinig of the value of marginal product. Data and information from 2001 to 2006 from 26 provinces in Iran is collected from secondary sources. The results of this study indicate that the economic value of water used in wheat production is between $ 0.07 and $ 0.32per cubic meter in 2006 year. The estimated prices are much higher than local (current) prices of these inputs