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A theoretical model of water and trade
Uppsala University, Disciplinary Domain of Science and Technology, Earth Sciences, Department of Earth Sciences, LUVAL.ORCID iD: 0000-0002-8180-4996
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2016 (English)In: Advances in Water Resources, ISSN 0309-1708, E-ISSN 1872-9657, Vol. 89, 32-41 p.Article in journal (Refereed) Published
Abstract [en]

Water is an essential input for agricultural production. Agriculture, in turn, is globalized through the trade of agricultural commodities. In this paper, we develop a theoretical model that emphasizes four tradeoffs involving water-use decision-making that are important yet not always considered in a consistent framework. One tradeoff focuses on competition for water among different economic sectors. A second tradeoff examines the possibility that certain types of agricultural investments can offset water use. A third tradeoff explores the possibility that the rest of the world can be a source of supply or demand for a country's water-using commodities. The fourth tradeoff concerns how variability in water supplies influences farmer decision-making. We show conditions under which trade liberalization affect water use. Two policy scenarios to reduce water use are evaluated. First, we derive a target tax that reduces water use without offsetting the gains from trade liberalization, although important tradeoffs exist between economic performance and resource use. Second, we show how subsidization of water-saving technologies can allow producers to use less water without reducing agricultural production, making such subsidization an indirect means of influencing water use decision-making. Finally, we outline conditions under which riskiness of water availability affects water use. These theoretical model results generate hypotheses that can be tested empirically in future work.

Place, publisher, year, edition, pages
2016. Vol. 89, 32-41 p.
Keyword [en]
Water resources; Trade; Theoretical model; Profit maximization; Decision-making under risk; Tradeoffs
National Category
Oceanography, Hydrology, Water Resources
URN: urn:nbn:se:uu:diva-275346DOI: 10.1016/j.advwatres.2015.12.016ISI: 000371312500004OAI: oai:DiVA.org:uu-275346DiVA: diva2:900047
Available from: 2016-02-03 Created: 2016-02-03 Last updated: 2016-04-14Bibliographically approved

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