The economic impact of agricultural pollutions in Iran, spatial distance function approach

Pollution has increased in Iran in the last two decades due to agricultural activities. Pollutions are released into the atmosphere and thereafter pollute water and soil resources. Therefore, it is important to develop models that can estimate the economic value of these Pollutions. For this purpose, a Spatial Output Distance Function was used in the present study to estimate the shadow price of carbon dioxide emission and water salinity in spatial and temporal dimensions. This method can be used as a new method to estimate the value of externalities. In this study, the data of provinces in Iran during 1995-2014 were used. The results showed that the total shadow price of agricultural Pollutions was equal to 42.54 dollars per unit. In addition, the effects due to the adjacency of regions to each other led to the transfer of pollution and its externalities were equal to 26.3 dollars per unit of pollution. This finding refers to the importance of considering the spatial dimension when analyzing the shadow price of pollutions caused by production. Thus, internalizing the damage caused by pollutions based on the adjacency of regions to each other can increase the efficiency of the production environment.