Agricultural Economics Department


Date of this Version



Cornhusker Economics (January 30, 2013)


Published by University of Nebraska–Lincoln Extension, Institute of Agriculture & Natural Resources, Department of Agricultural Economics. Copyright © [2013] Board of Regents, University of Nebraska.


Life on earth depends on water. Unfortunately, water resources are not evenly distributed. There are countries with abundant water supplies, such as Brazil or Canada, and countries that lack water resources, such as Egypt or Jordan. Because water is critical for the production of food and other goods, as well as for human consumption, recreation and ecosystem support, competition among the various users for available supplies is often intense. The problem is compounded by the fact that water markets often work imperfectly or are lacking altogether.

What can countries with limited water resources do? In rare cases, it may be possible to transfer water from water-abundant regions. For example, the small African country of Lesotho has abundant water supplies and sells its surpluses to South Africa (Mwangi, 2007). Another possibility is to build hydraulic infrastructures (wells, desalination plants, dams, etc.), which can be very expensive and often prove to be environmentally problematic (Velazquez, 2007). Yet another possibility is to consider importing agricultural products that require a lot of water during their production processes. Imports of such goods reduce the need to produce them in the country with scarce water resources. Water imported in the form of water-intensive goods is often referred to as “virtual water.”