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Virtual water and the inequality in water content of consumption

Published online by Cambridge University Press:  21 March 2022

Mohamad Afkhami ,
Thomas Bassetti ,
Hamed Ghoddusi  and
Filippo Pavesi Open the ORCID record for Filippo Pavesi [Opens in a new window]
Mohamad Afkhami
Affiliation:
Blend 360, Columbia, MD, USA
Thomas Bassetti
Affiliation:
Department of Economics and Management “Marco Fanno”, University of Padova, Padova, Italy
Hamed Ghoddusi
Affiliation:
Orfalea College of Business, California Polytechnic State University, San Luis Obispo, CA, USA
Filippo Pavesi*
Affiliation:
Carlo Cattaneo University (LIUC), Castellanza, VA, Italy Stevens Institute of Technology, Hoboken, NJ, USA
*
*Corresponding author. E-mail: fpavesi@liuc.it
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Abstract

We present evidence that international trade may exacerbate the initial unequal distribution of hydric resources. This result is driven by the fact that countries exporting agricultural goods are relatively abundant (with respect to capital) in the combined availability of water and arable land but, in absolute terms, scarce in capital and not richer in water in comparison to more developed ones. Due to both the scarcity of capital and the lower relative price of natural resources with respect to capital, the total value of production in these developing countries is modest, implying that international trade can lead to a less even distribution of the water content of consumption. Policies sustaining water prices and, more generally, those of natural resources (or lower capital costs) may contribute to offsetting this effect and allow for trade to play a positive role in reducing the uneven distribution of water endowments.

Keywords

global water tradeHeckscher-Ohlininternational tradevirtual waterwater crisiswater inequality

JEL classification

O13: Agriculture • Natural Resources • Energy • Environment • Other Primary Products Q56: Environment and Development • Environment and Trade • Sustainability • Environmental Accounts and Accounting • Environmental Equity • Population Growth Q25: Water Q27: Issues in International Trade F14: Empirical Studies of Trade F18: Trade and Environment
Type
Research Article
Information
Environment and Development Economics , Volume 27 , Issue 5 , October 2022 , pp. 470 - 490
Copyright
Copyright © The Author(s), 2022. Published by Cambridge University Press

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