Water Endowments, Virtual Water Trade and Pricing of Water Resources

There are two data sets related to virtual water in this publication. Virtual water is defined as the water factor content embodied in international trade. Virtual water is derived by parsing domestic final consumption and final consumption export data through the standard multi-region, multi-sector import output table by ADB. Together with water use data from the World Bank, this provides a country's water factor exports and also water factor imports. Method wise, this is similar to decomposing exports using the multi-region Leontief inverse matrix in the global value chain literature (to derive foreign and domestic VA embedded in trade).

The first dataset is at a country aggregate level, across time. Besides virtual water exports and imports, other variables like water endowments, water tariffs are also merged into this dataset. There is also a comparative advantage of water variable (see Kang et al. 2007). Together these allow the researcher to test how aggregate virtual exports and imports can be explained by various economic factors.

The second dataset is similar to the first in terms of data variables, but trade is disaggregated into bilateral country pairs (typical in gravity model setup). This allows researchers to go beyond aggregate level analysis, and analyze how bilateral trade in water factor content is affected by various economic factors.