An Econometric Analysis of Agricultural Production, Focusing on the Shadow Price of Groundwater: Policies Towards Socio-Economic Sustainability

The focus of this chapter is on the agricultural sector in the Asopos catchment as it has a significant impact on the status of water in the area. In particular, the aim of the chapter is to estimate the farmers’ valuation of groundwater’s shadow price for the region of Asopos. In order to achieve that, an agricultural micro-economic data-set from the catchment has been collected through the use of a detailed agricultural questionnaire. As it will be explained in the chapter, the questionnaire focuses on collecting information regarding cultivations, production structures and use of groundwater for irrigation. The objective of the micro-econometric analysis is to uncover patterns of groundwater use and farm efficiency. The chapter presents the derived estimates that make possible the analysis of the impact of different economic policies, – which will be used for the implementation of an optimal, sustainable and integrated water policy – on farmers’ profits and social welfare. The chapter finishes with policy recommendations based on the principle of socio-economic sustainability that assures both economic efficiency of farms and concludes with the estimation of groundwater for irrigation shadow price and how this can be used in the design of pumping taxes to reduce pollution and to increase farms efficiency.