Exploring the relation between water scarcity and virtual water trade

Additional thesis report - In this research, a theoretical model is proposed to obtain a better understanding of how hydro-climatic change affects societies, and specifically how an increase in water scarcity can affect societies. The way this is done is not to look solely at the direct effects of water scarcity on a society, but also on the indirect effects it may have through changes in technological development and virtual water trade. Starting point of the research is a model of a society suffering from an increase in water scarcity. Pande et al. (2014) presented such a model that was able to replicate patterns of technological, population, production and consumption per capita changes. The model introduced in this paper represents a closed economy with only one good being produced. The aim of this research is to include the trade of water intensive goods, also known as virtual water trade. In previous studies it has been shown that global trade patterns can be influenced by water scarcity and vice-versa. General agreement about the extent to which this relationship holds is still lacking. One of the reasons for this is that there are many areas suffering from water scarcity actually exporting water-intensive goods. This is not very surprising when it’s considered that trade relations are dependent on many things other than water availability. By including the technological development of a society, and the production of more than one good, an attempt is made to design a model where trade can emerge from inherent dynamics. While the objective of the research is to construct such a model for two societies, the scope of this report is confined to the development of a model of one society that produces two goods. One of the goods is more water intensive, while the other good requires more labour. The model looks for the equilibrium situation, where the price of the goods is such that the supply is equal to the demand. This situation is called market equilibrium. Even though this equilibrium is almost never reached in reality, it can be used to display information about the driving dynamics that occur in reality.Civil Engineering and GeosciencesWater Managemen