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Abstract
This study highlights the methodological challenges in determining the value of water in informal water markets. As the decision to participate in water markets is unlikely to be random, self-selectivity is an important issue for an unbiased estimation of the participating farmers’ revealed willingness to pay. The relevance of these issues is illustrated for an informal irrigation water market in Iran. A two-stage random sampling was carried out in pistachio-growing farms which are irrigated by water from the Rafsanjan aquifer in Iran during 2008–2009. A Heckman sample selection model shows that the real willingness to pay can be less than the observed prices in an informal water market.
Acknowledgment
We thank the Iran Water Resources Management Company (IWRMC) for providing piezometric data. T. J. Jaghdani gratefully acknowledges the help of Mr A. N. Esfandiari, former head of the economic desk at IWRMC, and A. G. Alizadeh, director general of Amin Padidar Pistachio Co. during the field research. Thanks to Mrs Tayebeh Aryan, the head of economic section of Mahabghodss Consulting Engineers Co., for her cooperation and help. Thanks also to the Rafsanjan Irrigation Water Authority (RIWA) for their cooperation, especially Mr Abbas Darvishi, the responsible person for statistics and information at RIWA. T. J. Jaghdani is very grateful to local people for their patience and cooperation during field surveys. The authors also thank the two anonymous reviewers and the journal editor for their useful comments.