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The Global Economics of Water: Is Water A Source of Comparative Advantage?


  • Debaere, Peter


Freshwater scarcity is bound to be a major challenge of the 21st century. Drawing on newly available data, I investigate to what extent countries make efficient use of the very uneven water resources on a global scale. In particular, I find that countries that are relatively water abundant tend to export more water-intensive products. This evidence supports the hypothesis that water is a source of comparative advantage. My findings also indicate that water contributes significantly less to the pattern of exports than the traditional production factors such as labor and physical capital. In light of climate change, this suggests relatively moderate disruptions to trade on a global scale due to changing precipitation patterns. My results do not provide consistent evidence that there is a difference in the extent to which water determines the pattern of trade between water-scarce and water-abundant countries.

Suggested Citation

  • Debaere, Peter, 2012. "The Global Economics of Water: Is Water A Source of Comparative Advantage?," CEPR Discussion Papers 9030, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:9030

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    References listed on IDEAS

    1. Werner Antweiler & Daniel Trefler, 2002. "Increasing Returns and All That: A View from Trade," American Economic Review, American Economic Association, vol. 92(1), pages 93-119, March.
    2. Young, Robert A. & Haveman, Robert H., 1985. "Economics of water resources: a survey," Handbook of Natural Resource and Energy Economics,in: A. V. Kneeseā€  & J. L. Sweeney (ed.), Handbook of Natural Resource and Energy Economics, edition 1, volume 2, chapter 11, pages 465-529 Elsevier.
    3. Nathan Nunn, 2007. "Relationship-Specificity, Incomplete Contracts, and the Pattern of Trade," The Quarterly Journal of Economics, Oxford University Press, vol. 122(2), pages 569-600.
    4. Debaere, Peter & Demiroglu, Ufuk, 2003. "On the similarity of country endowments," Journal of International Economics, Elsevier, vol. 59(1), pages 101-136, January.
    5. Wichelns, Dennis, 2004. "The policy relevance of virtual water can be enhanced by considering comparative advantages," Agricultural Water Management, Elsevier, vol. 66(1), pages 49-63, April.
    6. A. Colin Cameron & Jonah B. Gelbach & Douglas L. Miller, 2011. "Robust Inference With Multiway Clustering," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 29(2), pages 238-249, April.
    7. Arnaud Costinot, 2009. "An Elementary Theory of Comparative Advantage," Econometrica, Econometric Society, vol. 77(4), pages 1165-1192, July.
    8. Andrei A. Levchenko, 2007. "Institutional Quality and International Trade," Review of Economic Studies, Oxford University Press, vol. 74(3), pages 791-819.
    9. Jedidiah Brewer & Robert Glennon & Alan Ker & Gary Libecap, 2007. "Water Markets in the West: Prices, Trading, and Contractual Forms," ICER Working Papers 30-2007, ICER - International Centre for Economic Research.
    10. Trefler, Daniel, 1995. "The Case of the Missing Trade and Other Mysteries," American Economic Review, American Economic Association, vol. 85(5), pages 1029-1046, December.
    11. Zhou Yuan & Richard S.J. Tol, 2004. "Evaluating the costs of desalination and water transport," Working Papers FNU-41, Research unit Sustainability and Global Change, Hamburg University, revised Dec 2004.
    12. Robert E. Baldwin, 2008. "The Development and Testing of Heckscher-Ohlin Trade Models: A Review," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262026562, January.
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    More about this item


    Comparative Advantage; International Trade; Water;

    JEL classification:

    • F1 - International Economics - - Trade

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