Global Virtual Water Trade, 1990-2015: Assessing Virtual Water Trade Patterns between High Income, Upper-Middle Income, Lower-Middle Income and Low Income Countries

Due to globalization, increasing amounts of water are traded across borders as virtual water embodied in traded products. The thesis traces global water trade patterns at different levels of income between 1990 and 2015 in order to test whether developed countries outsource their water-intensive production to less developed countries increasing global water use in the process. The research problem is approached by means of an environmentally extended multiregional input-output analysis using the Eora26 database to identify the balance of water embodied in trade of high, upper-middle, lower-middle and low income countries. This methodology is supplemented with a new accounting technique from the field of carbon emission research taking technological differences between countries at different income levels into consideration and assessing the contribution of the trade specialization and the monetary trade balance to the technology-adjusted balance of water embodied in trade. The thesis finds that high income countries outsourced water-intensive production to lower-middle income and low income countries between 1990 and 2015 whereas the virtual water trade balance of upper-middle income countries changed over time. The results support the displacement and pollution haven hypotheses and suggest that structural change processes of economic development lead to these unequal terms of trade