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A Micro-Econometric Approach to Deriving Use and Non-Use Values of in-situ Groundwater: The Vosvozis Case Study, Greece

  • Koundouri, Phoebe
  • Babalos, Vassilis
  • Stithou, Mavra
  • Anastasiou, Ioannis

The present study attempts to estimate the shadow price of unextracted groundwater in the Vozvozi aquifer. In the context of this study, we model the production function of vertically integrated agricultural firms in terms of an input-oriented distance function with multiple inputs. Duality theory is employed in order to extract information regarding the in situ shadow price of groundwater. This shadow price is of vital importance to the implementation of the EU Water Framework Directive and EU groundwater Directive, because it allows per farm estimation of the value of groundwater. It also allows the calculation of the level of cost recovery when resource’s environmental and resource costs are also considered. In this context, groundwater dependent ecosystems are of great relevance. In our case study, flow both from groundwater and from the Vosvozis river discharges into Ismarida Lake, an extremely important ecosystem protected by the Ramsar Convention on Wetlands. Furthermore, in the coastal part of the study area a system of coastal lagoons is formed, where surface, groundwater and seawater interact. All the area of Ismarida lake and the coastal lagoons forms an extremely important ecosystem. Groundwater level decline induces recharge from Vosvozis River and Ismarida lake, diminishing thus an important source for the life of the wetland ecosystem. Another threat due to groundwater level decline is the intrusion of seawater in the wetland area, causing thus a serious alteration in the initial character of this protected ecosystem. This study, apart from the estimation of the level of resource’s cost recovery, will offer the opportunity to compare individual farmer’s valuation of the marginal unit of groundwater in the aquifer with the socially optimal shadow price of in situ ground-water reported in the relevant literature. Conclusions will aim to provide policy recommendations for a water pricing that provides adequate incentive for users to use groundwater resource efficiently considering groundwater dependent ecosystems.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 38266.

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Date of creation: 2011
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Handle: RePEc:pra:mprapa:38266
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  1. Marva Stithou & Eva Kougea & Phoebe Koundouri & Pertti Ala-Aho & Riku Eskelinen & Timo Karjalainen & Bjorn Klove & Manuel Pulido-Velazquez & Kalle Reinikainen & Pekka Rossi, . "The Value of Scientific Information on Climate Change: A Choice Experiment on Rokua esker, Finland," DEOS Working Papers 1131, Athens University of Economics and Business.
  2. Phoebe Koundouri & Panos Pashardes & Timothy Swanson & Anastasios Xepapadeas, . "The Economics of Water Management in Developing Countries Problems, Principles and Policies," DEOS Working Papers 0302, Athens University of Economics and Business.
  3. Halvorsen, Robert & Smith, Tim R, 1984. "On Measuring Natural Resource Scarcity," Journal of Political Economy, University of Chicago Press, vol. 92(5), pages 954-64, October.
  4. Aigner, Dennis & Lovell, C. A. Knox & Schmidt, Peter, 1977. "Formulation and estimation of stochastic frontier production function models," Journal of Econometrics, Elsevier, vol. 6(1), pages 21-37, July.
  5. Halvorsen, Robert & Smith, Tim R, 1991. "A Test of the Theory of Exhaustible Resources," The Quarterly Journal of Economics, MIT Press, vol. 106(1), pages 123-40, February.
  6. Koundouri, Phoebe, 2000. "Three approaches to measuring natural resource scarcity: theory and application to groundwater," MPRA Paper 38265, University Library of Munich, Germany.
  7. Wunder, Sven & Engel, Stefanie & Pagiola, Stefano, 2008. "Taking stock: A comparative analysis of payments for environmental services programs in developed and developing countries," Ecological Economics, Elsevier, vol. 65(4), pages 834-852, May.
  8. Coelli, Tim J., 1995. "Recent Developments In Frontier Modelling And Efficiency Measurement," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 39(03), December.
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