Virtual Water Trade and Bilateral Conflicts

IMT Lucca EIC Working Paper Series 02, January 2017

29 Pages Posted: 28 Oct 2017

See all articles by Enrico De Angelis

Enrico De Angelis

IMT Institute for Advanced Studies

Rodolfo Metulini

University of Brescia - Department of Economics and Management; Scuola Superiore Sant'Anna di Pisa; IMT Institute for Advanced Studies

Vincenzo Bove

University of Warwick - Department of Politics and International Studies

Massimo Riccaboni

IMT Institute for Advanced Studies

Date Written: 2017

Abstract

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

De Angelis, Enrico and Metulini, Rodolfo and Bove, Vincenzo and Riccaboni, Massimo, Virtual Water Trade and Bilateral Conflicts (2017). IMT Lucca EIC Working Paper Series 02, January 2017, Available at SSRN: https://ssrn.com/abstract=2946149 or http://dx.doi.org/10.2139/ssrn.2946149

Enrico De Angelis

IMT Institute for Advanced Studies ( email )

Piazza San Francesco 19
Lucca
Italy

Rodolfo Metulini (Contact Author)

University of Brescia - Department of Economics and Management ( email )

Contrada Santa Chiara, 50
BRESCIA, BS 25122
Italy

Scuola Superiore Sant'Anna di Pisa ( email )

Biblioteca Scuola Superiore Sant'Anna
Piazza Martiri della Liberta, n. 33
Pisa, 56127
Italy

IMT Institute for Advanced Studies ( email )

Complesso San Micheletto
Lucca, 55100
Italy

Vincenzo Bove

University of Warwick - Department of Politics and International Studies ( email )

Coventry CV4 7AL
United Kingdom

Massimo Riccaboni

IMT Institute for Advanced Studies ( email )

Piazza San Ponziano 6
Lucca, 55100
Italy

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