Critically analysis of virtual water from the perspective of policy-making

Document Type : review paper

Authors

• H. Ghoddusi ¹
• H. Davari ²

¹ Stevens Institute of Technology

² Amirkabir University of Technology(Tehran Polytechnic)

10.22067/jwsd.v3i1.59520

Abstract

The concept of virtual water trade refers to transact of the water consumed for production of goods and agricultural products through international trade. The Anthony Allan introduced this concept to improve global water used efficiency. In this paper, the original theory of Allen has been investigated through incorporating virtual water as a factor of production in Heckscher-Ohlin international trade model. The results indicate that contrary to Allen's initial optimistic forecasts, virtual water trade increased the pressure on water resources in some countries. This pattern may be the consequence of the following causes: (1) the imbalance of production factors relative to one another (especially water to land) in the agricultural sector (2) the inefficient agricultural water pricing, (3) government's agricultural incentive policies, and (4) barriers to free trade. Then, we have investigated the experiences of using the virtual water concept from the perspective of policy making on sustainable water resources management in the framework of similar countries to Iran and also, the parallel policy options.

Keywords

• virtual water
• international trade
• water shadow price
• policy making of the water resources

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