Sustainability, Vol. 11, Pages 5118: Welfare Economic Analysis of Lifting Water Subsidies for Banana Farms in Jordan (Sustainability)

Jordan is one of the four driest countries in the world. Due to rapid population growth, water demand distinctly exceeds supply. The tariff to cover operations and maintenance (OM) and depreciation costs will be JD 0.066 per cubic meter (1 JD = 1.41 US$) if billing and collection efficiencies were able to reach 100 percent. The current charges of irrigation water in the Jordan Valley are JD 0.011/M3.This study aims at evaluating the effect of lifting the irrigation water subsidy for bananas in the Jordan Valley on the producers’ income, the consumers’ expenditure, the government’s budget, and Jordanian society. The total area planted with banana trees in 2017 was 1533 ha producing about 73.9 thousand tons of bananas. Previous studies have focused on evaluating the effect of input subsidies on prices and quantities, while in this study we evaluate the monetary effect on lifting these subsidies. A partial market equilibrium model, which evaluates the consumer surplus and producer surplus, was used to analyze the welfare effect of lifting the subsidies for irrigation water for the banana farms in Jordan. All the relevant players in the irrigated banana sector in Jordan were analyzed in this study including: producers, consumers, taxpayers, and society. Welfare economic instruments such as consumer surplus, producer surplus, and economic efficiency have been applied in the analysis. The government revenue will increase during the selected years by JD 3.1 million, JD 4.5 million and JD 3.8 million respectively. The dead weight loss during the three years will be JD 23.2 thousand, JD 44.3 thousand and JD 38.6 thousand respectively.