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

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 investigation 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, 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 offers the opportunity to reveal individual farmer’s valuation of the marginal unit of groundwater in the aquifer and provide policy recommendations for water pricing that provides adequate incentives for users to use groundwater resource efficiently considering groundwater dependent ecosystems.