Natural resource economists are concerned with the problem of iternalizing the external cost of resource exploitation. Overpumping of groundwater resource is a typical case of externality in Rafsanjan. The objective of this study is to compute the external cost of overpumping in
Rafsanjan by estimating various functions and make projection based on the estimated functions. The results showed that external cost is about 24% of
total groundwater costs in this region. In addition, external cost is increasing rapidly and reaching up to 71 % of total costs in year 1400.
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