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A Case Study of Lake Urmia Basin, Iran

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A Case Study of Lake Urmia Basin, Iran WELFARE EFFECTS OF ALTERNATIVE IRRIGATION WATER PRICES ON FARM HOUSEHOLDS: A CASE STUDY OF LAKE URMIA BASIN, IRAN Thesis Submitted in Fulfillment of the Requirements for the Degree of PhD in International Development Studies at the Institute of Development Research and Development Policy (IEE) Ruhr-University Bochum, Germany By Farah Asna Ashari Supervised by Prof. Dr. Helmut Karl Prof. Dr. Wilhelm Löwenstein Bochum, 2018 TABLE OF CONTENTS LIST OF FIGURES ............................................................................................................. iii LIST OF TABLES ............................................................................................................... i v LIST OF ABBREVIATIONS ............................................................................................. vi INTRODUCTION ................................................................................................................ 1 CHAPTER ONE RESEARCH BACKGROUND AND FRAMEWORK ..................................................... 6 1.1. Introduction to Chapter One ............................................................................................ 6 1.2. Importance of Irrigation in Agriculture ........................................................................... 8 1.3. Impact of Water Pricing Schemes on Farmers .............................................................. 11 1.4. Direction of This Research ............................................................................................ 14 CHAPTER TWO METHODOLOGICAL AND THEORETICAL FOUNDATION ................................. 17 2.1. Introduction to Chapter Two ......................................................................................... 17 2.2. Ecosystem Valuation ..................................................................................................... 1 7 2.3. Economic Valuation Method If Nature Is a Factor of Production ................................. 20 2.4. Theoretical Foundation .................................................................................................. 2 3 2.5. Neoclassical Production Function and Profit Maximization ......................................... 28 CHAPTER THREE THE IMPACT OF WATER PRICING ON FARMING: CASE STUDY LAKE URMIA ................................................................................................................................ 33 3.1. Introduction to Chapter Three ....................................................................................... 33 3.2. Research Area ................................................................................................................ 33 3.2.1. Iran ........................................................................................................................................... 33 3.2.2. Lake Urmia Basin .................................................................................................................... 35 3.2.3. Current Situation and Issues of Lake Urmia Basin .................................................................. 39 3.2.4. Water Use and Irrigation Patterns in Lake Urmia Basin .......................................................... 43 3.3. Sampling ........................................................................................................................ 47 3.4. Instrumentation .............................................................................................................. 50 3.4.1. Development of the Questionnaire ........................................................................................... 51 3.5. Data Processing ............................................................................................................. 52 3.5.1. Screening and Cleaning the Data ............................................................................................. 52 i 3.5.2. Dealing with Missing Values ................................................................................................... 54 3.5.3. Consolidating Scattered Information ....................................................................................... 54 3.6. Empirical Model and Variable Definition ..................................................................... 54 3.6.1. Empirical Model ....................................................................................................................... 54 3.6.2. Variable Definition ................................................................................................................... 56 3.7. Descriptive Analysis ...................................................................................................... 58 3.7.1. Descriptive Analysis of Variables of the Study ....................................................................... 59 3.7.2. Water Conservation in the Sample Area .................................................................................. 64 3.8. Model Estimation ........................................................................................................... 68 3.8.1. Post Estimation Tests ............................................................................................................... 68 3.8.2. Effect Size ................................................................................................................................ 74 3.8.3. Goodness-of-Fit and Model Selection ...................................................................................... 76 3.9. Districts Differences ...................................................................................................... 77 3.9.1. Post estimation Tests ................................................................................................................ 78 3.9.2. Chow Test for District Differences .......................................................................................... 81 3.10. Elasticity of Demand ................................................................................................... 8 3 3.11. Scenarios and Results .................................................................................................. 8 5 3.12. Wealth and Economic Status Effect ............................................................................ 86 3.12.1. Quantile Regression ............................................................................................................... 87 3.12.2. Farm Revenues and Annual Expenditures as Wealth Proxy .................................................. 89 3.12.3. Lorenz Curve and Gini Coefficient ........................................................................................ 92 SUMMARY AND CONCLUSIONS ................................................................................. 95 BIBLIOGRAPHY ............................................................................................................. 100 APPENDICES ................................................................................................................... 111 Appendix A (Section 3.2. Research Area) .......................................................................... 111 Appendix B (Section 3.8. Model Estimation) .................................................................... 111 Appendix C (Section 3.9. Districts Differences) ................................................................ 117 Appendix D (Section 3.10. Elasticity of Demand) ............................................................. 129 Appendix E (Section 3.12. Equity and Distributional Effects) .......................................... 130 Appendix F (List of Interviewed Experts in the Field) ....................................................... 135 Appendix G (Questionnaire) ............................................................................................... 136 ii LIST OF FIGURES Impact Pathway of Policy Change to Human Well-being and Ecosystem Figure 1.1 15 Maintenance …………………………………………………………………. Figure 2.1 Total Environmental Economic Value …………………………………...….. 19 Figure 3.1 Location of the Case Study Region ..………………………….……………. 36 Figure 3.2 Water Consumption by Sector in Lake Urmia Basin ………………………… 37 Figure 3.3 Satellite Imagery Showing Changes in Lake Urmia …………………………. 39 Figure 3.4 Share of Crop Type of Total Farm Revenue in Sampled Villages ..…….……. 45 Figure 3.5 Percentage of Water Withdrawal by Source in Iran in 2004 …………….…… 46 Figure 3.6 Selected Districts by Purposive Sampling Method ………………….……… 49 Figure 3.7 Reasons for Poor Water Conservation Practices ………………………….… 66 Figure 3.8 Graphical Representation of the Quantile Regression Estimates …….……... 89 Figure 3.9 Lorenz Curve for Wealth Distribution Before and After Water Price Changes 93 iii LIST OF TABLES Table 3.1 Total Economic Value of Lake Urmia …………………………………… 38 Table 3.2. Water-Land, Water-Revenue , and Revenue -Water Ratios ……………… 44 Table 3.3. Share of Crop Type of Total Farm Revenue in Districts (Percentage) …… 46 Table 3.4. Surveyed Villages and Distribution of the Sampled Households ……..…. 53 Table 3.5 Descriptive Statistics of Farm Revenue in US Dollar …………….………. 59 Table 3.6 Descriptive Statistics of Land Size in Hectare ……………………………. 60 Table 3.7. Descriptive Statistics of Labor in Man-day ………………………………. 61 Table 3.8. Descriptive Statistics of Intermediate Inputs Expenditures in US Dollar … 61 Table 3.9 Descriptive Statistics of Irrigation Water Volume in M3 (Villages) ……… 62 Table 3.10 Descriptive Statistics of Irrigation
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