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Long Term Drivers of Global Virtual Water Trade: A Trade Gravity Approach for 1965–2010

Duarte, Rosa, Pinilla, Vicente, Serrano, Ana
Ecological economics 2019 v.156 pp. 318-326
environmental factors, equations, foods, globalization, trade, virtual water, water resources
In the era of globalisation over the last half century, there has been an increase in the exchange of agricultural and food products. This internationalisation process has led to intense environmental pressures on a global level, which has been the case of water resources. This paper studies the determinants of global virtual water trade flows between 1965 and 2010. Using panel data techniques, we have evaluated and quantified the explanatory factors of bilateral virtual water transfers between 70 countries as a result of agri-food trade. We have used the well-known trade gravity equation to explain exchanges of water embodied in agricultural goods on the basis of economic, geographical, institutional and environmental factors. The analysis considers economic country heterogeneity in order to evaluate how trade impacts water resources depending on different development patterns. Our main findings indicate that the traditional economic, institutional and geographic factors played a key role as drivers of virtual water bilateral trade flows between 1965 and 2010. In addition, the natural endowments also exerted a notable influence on these trends.