Economic analysis of irrigation services. An application of the hedonic price method on the FADN data

Abstract

The economic valuation of water uses, as the Water Framework Directive (EC/60/2000) suggests, should support policymakers in water management. Aiming to assess the economic value of irrigation water services, a hedonic price analysis was conducted on the value of farmland. Specifically, we examined the differences between collective and self-supply irrigation services, with the hypothesis that each reflects different water supply qualities that are capitalized into land value. A homogeneous sample of olive farms in the Apulia region was analysed using data from the Farm Accountancy Data Network. The results confirm the hypothesis that different economic values are assigned to water services. A higher value of self-supply service with respect to collective ones might be associated with the greater security and reliability of the service provided. Finally, our analysis points out that the Farm Accountancy Data Network database can provide policymakers with a harmonized dataset for the economic evaluation of irrigation water. This can help them to develop evidence-based policies, as required in the Water Framework Directive.