Value of Irrigation Water in the Middle Atlantic States: An Econometric Approach

Abstract Estimation of the economic value of irrigation water is complicated by a lack of data on the price or marginal cost of water. Through econometric estimation of an aggregate total value product function, this paper obtains marginal irrigation water value estimates for the Middle Atlantic region. Additionally, the impact of temperature and soil conditions on aggregate production within the region is estimated. Ridge regression and covariance analysis are employed to deal with problems of multicollinearity and simultaneous equation bias, respectively. Estimates indicate a substantial and growing return to irrigation within the region.