Determining the Economic Value of Water using Production Functions and Selecting the Optimal Model for Sugar Beet Crop: Case Study of the Gharehghom and Namakzar Basins in Iran

Among the production factors of agricultural sector, water is considered as one of the most important factors in crop production. Estimating the cost share of this input from total cost of crop production and checking time trend of this input in the studied area can provide an overview of the situation of agricultural economics in terms of water input. In addition, by determining the cost share of water, we can achieve a measure for estimating water productivity in this sector. The economic value of water is determined by a set of costs that are somehow effective in water supply and exploitation and its economic value would be different according to its type of use. In this study and in order to estimate the economic value of water, the most common production functions in the classic method are determined and using econometric methods the best form of production function is selected. The results show that translog production function is as the best to estimate the economic value of water in the agricultural sector of Khorasan Razavi province. To achieve the final value or the economic value of water, the coefficient values obtained from the estimation were substituted in derivative of translog function with respect to water and finally the result was multiplied by the ratio of output to water consumption in agricultural sector of Khorasan Razavi province in 2018. The results of calculation show that this value is equal to 850 rials per cubic meter of water for Gharehghom basin in sugar beet crop in 2018. This value for Namakzar basin in Khaf is equal to 580 rials per cubic meter of water. Therefore, the best area for investing on sugar beet crop is Namakzar basin in Khaf. Keywords - The Economic Value of Water, Production Function , Econometric, Iran.