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Determinants of Virtual Water Flows in the Mediterranean

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  • Andrea Fracasso
  • Martina Sartori
  • Stefano Schiavo

Abstract

The aim of the paper is to investigate the main determinants of the bilateral virtual water ‘flows’ associated with international trade in agricultural goods across the Mediterranean basin. Virtual water refers to the volume of water used in the production of a commodity or a service. The exchange of water as embedded in traded goods brings about the so-called virtual water ‘trade’. We consider the bilateral gross ‘flows’ of virtual water in the area and study what export-specific and import-specific factors are significantly associated with virtual water ‘flows’. We follow a sequential approach. Through a gravity model of trade, we obtain a “refined” version of the variable we aim to explain, one that is free of the amount of flows due to pair-specific factors affecting bilateral trade flows and that fully reflects the impact of country-specific determinants of virtual water ‘trade’. A number of countryspecific potential explanatory variables is presented and tested. To identify the variables that help to explain the bilateral ‘flows’ of virtual water, we adopt a model selection procedure based on model averaging. Our findings confirm one of the main controversial results in the literature: larger water endowments do not necessarily lead to a larger ‘export’ of virtual water, as one could expect. We also find some evidence that higher water irrigation prices reduce (increase) virtual water ‘exports’ (‘imports’).

Suggested Citation

  • Andrea Fracasso & Martina Sartori & Stefano Schiavo, 2014. "Determinants of Virtual Water Flows in the Mediterranean," IEFE Working Papers 75, IEFE, Center for Research on Energy and Environmental Economics and Policy, Universita' Bocconi, Milano, Italy.
  • Handle: RePEc:bcu:iefewp:iefewp75
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Angela Cheptea & Catherine Laroche-Dupraz, 2019. "Is irrigation driven by the economic value of internationally traded agricultural products?," Post-Print hal-02278996, HAL.
    2. Andrea Fracasso & Massimo Riccaboni & Martina Sartori & Stefano Schiavo, 2017. "Modeling the future evolution of the virtual water trade network," Sciences Po publications info:hdl:2441/4krkv5tkmp8, Sciences Po.
    3. Song, Jianfeng & Yin, Yali & Xu, Hang & Wang, Yubao & Wu, Pute & Sun, Shikun, 2020. "Drivers of domestic grain virtual water flow: A study for China," Agricultural Water Management, Elsevier, vol. 239(C).
    4. Pier Paolo Miglietta & Domenico Morrone, 2018. "Managing Water Sustainability: Virtual Water Flows and Economic Water Productivity Assessment of the Wine Trade between Italy and the Balkans," Sustainability, MDPI, Open Access Journal, vol. 10(2), pages 1-19, February.
    5. Marta Antonelli & Martina Sartori, 2014. "Unfolding the Potential of the Virtual Water Concept. What is still under debate?," IEFE Working Papers 74, IEFE, Center for Research on Energy and Environmental Economics and Policy, Universita' Bocconi, Milano, Italy.
    6. Mohamad Afkhami & Thomas Bassetti & Hamed Ghoddusi & Filippo Pavesi, 2018. "Virtual Water Trade: The Implications of Capital Scarcity," Working Papers 03/2018, University of Verona, Department of Economics.
    7. Chen, Rui & Wilson, Norbert L.W., 2017. "Virtual Water Trade: Do Bilateral Tariffs Matter?," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 258279, Agricultural and Applied Economics Association.

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    More about this item

    Keywords

    virtual water ‘trade’; Mediterranean countries; Bayesian model averaging; weighted average least square.;
    All these keywords.

    JEL classification:

    • F18 - International Economics - - Trade - - - Trade and Environment
    • Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water

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