Assessing the Welfare Externalities of Excessive Groundwater Withdrawals (Case Study: Kerman-Corn Farmers of Orzouiyeh Plain)

Orzooiyeh plain is the most important and the largest crop production in Kerman province in Iran. The main sources of water supply in the plain are groundwater resources and unfortunately their excessive extraction has declined water table and created economical and environmental externalities. The aim of present study is estimation of the effect of ground water tables decline on welfare of farmers. For this purpose, first, production and cost functions of corn and then welfare function was estimated and Welfare changes were calculated in respect to changes in groundwater table. The required data and information were obtained through interviews with 151 farmers in the area in cropping year 2014-15 and Agriculture Organization of Kerman and Kerman Regional Water Authority. Results of this study showed that per one meter drop in water ground water table due to excessive withdrawals, welfare of farmers reduce to the amount of 72.3 million rials and total of welfare reduction of Orzouiyeh plain due to aquifer deficit is 58.3 billion rials.