Virtual Water Trade and Bilateral Conflicts
IMT Lucca EIC Working Paper Series 02, January 2017
29 Pages Posted: 28 Oct 2017
Date Written: 2017
In light of growing water scarcity, virtual water, or the water embedded in key water-intensive commodities, has been an active area of debate among practitioners and academics alike. As of yet, however, there is no consensus on whether water scarcity affects conflict behavior and we still lack empirical research intending to account for the role of virtual water in affecting the odds of militarized disputes between states. Using quantitative methods and data on virtual water trade, we find that bilateral and multilateral trade openness reduce the probability of war between any given pair of country, which is consistent with the strategic role of this important commodity and the opportunity cost associated with the loss of trade gains. We also find that the substantive effect of virtual water trade is comparable to that of oil and gas, the archetypal natural resources, in determining interstate conflicts’ probability.
Keywords: Conflicts; International Trade; Water Scarcity; Virtual Water; Strategic Commodities
JEL Classification: F51; Q25
Suggested Citation: Suggested Citation