Efficiency concept under stochastic consideration of water value in irrigated agricultural land in Crete, Greece

Abstract

Water is an increasingly scarce and valuable resource. It is generally accepted that there is a finite supply of water. As economies grow there is an increasing demand for water. The application of water to agricultural lands for irrigation is one of the essential uses of this natural resource in many areas. There is competition among agriculture, industry, and human consumption for the limited supplies of water. Efficiency studies are necessary, especially in areas where there is a shortage of factors of production such as water. Panel data for viticulture products, citrus products and olive oil for the time period 2002–2012, in the area of Iraklio, Crete, were used for the estimation of production models. The results indicate that the production process for the three crops cannot be represented by a single production function having a single set of coefficients. Different methods yield different efficiency measures. The stochastic frontier yields higher efficiency measures. Farmers are less efficient in the use of irrigation water than in the use of water and fertilizer together. The value of water is found to be equal to 0.73 euros/m3.