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The Effects of International Trade on Water Use

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  • Kazuki Kagohashi
  • Tetsuya Tsurumi
  • Shunsuke Managi

Abstract

The growing scarcity of water resources worldwide is conditioned not only by precipitation changes but also by changes to water use patterns; the latter is driven by social contexts such as capital intensity, trade openness, and income. This study explores the determinants of water use by focusing on the effect of trade openness on the degree to which water is withdrawn and consumed. Previous studies have conducted analyses on the determinants of water use but have ignored the endogeneity of trade openness. To deal with this endogeneity problem, we adopt instrumental variable estimation and clarify the determinants of water use. The determinants of water use are divided into scale, technique, and composition effects. Calculating each trade-induced effect, we examine how trade openness affects the degree of water use. Our results show that while trade has a positive effect on water withdrawal/consumption through trade-induced scale effects and direct composition effects, the trade-induced technique and the indirect composition effect, both of which exhibit a negative sign, counteract the scale effect and the direct composition effect, resulting in reduced water withdrawal/consumption. The overall effect induced by trade is calculated as being in the range of –1.00 to –1.52; this means that the overall effect of a 1% increase in the intensity of trade openness reduces the degree of water withdrawal/consumption by roughly 1.0–1.5%, on average. This result indicates that international bilateral trade would promote efficient water use through the diffusion of water-saving technologies and the reformation of industry composition.

Suggested Citation

  • Kazuki Kagohashi & Tetsuya Tsurumi & Shunsuke Managi, 2015. "The Effects of International Trade on Water Use," PLOS ONE, Public Library of Science, vol. 10(7), pages 1-16, July.
    • Handle: RePEc:plo:pone00:0132133
    DOI: 10.1371/journal.pone.0132133
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    Cited by:

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    2. Pier Paolo Miglietta & Domenico Morrone, 2018. "Managing Water Sustainability: Virtual Water Flows and Economic Water Productivity Assessment of the Wine Trade between Italy and the Balkans," Sustainability, MDPI, vol. 10(2), pages 1-19, February.
    3. Masoud Shirazi Abdolrasoul Ghasemi Teymour Mohammadi Jurica Šimurina Ali Faridzad Atefeh Taklif, 2020. "A Dynamic Network Comparison Analysis of Crude Oil Trade: Evidence from Eastern Europe and Eurasia," Zagreb International Review of Economics and Business, Faculty of Economics and Business, University of Zagreb, vol. 23(1), pages 95-119, May.
    4. Surender Kumar & Prerna Prabhakar, 2020. "Industrial energy prices and export competitiveness: evidence from India," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 22(1), pages 1-20, January.
    5. Zhengyan Liu & Xianqiang Mao & Peng Song, 2017. "GHGs and air pollutants embodied in China’s international trade: Temporal and spatial index decomposition analysis," PLOS ONE, Public Library of Science, vol. 12(4), pages 1-19, April.
    6. Pradyot Ranjan Jena & Babita Majhi & Ritanjali Majhi, 2022. "Estimating Long-Run Relationship between Renewable Energy Use and CO 2 Emissions: A Radial Basis Function Neural Network (RBFNN) Approach," Sustainability, MDPI, vol. 14(9), pages 1-17, April.
    7. Pradyot Ranjan Jena, 2018. "Does trade liberalization create more pollution? Evidence from a panel regression analysis across the states of India," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 20(4), pages 861-877, October.
    8. Pradyot Ranjan Jena & Shunsuke Managi & Babita Majhi, 2021. "Forecasting the CO 2 Emissions at the Global Level: A Multilayer Artificial Neural Network Modelling," Energies, MDPI, vol. 14(19), pages 1-23, October.
    9. Kitamura, Toshihiko & Managi, Shunsuke, 2017. "Driving force and resistance: Network feature in oil trade," Applied Energy, Elsevier, vol. 208(C), pages 361-375.
    10. Cristian Barra & Roberto Zotti, 2018. "Investigating the non-linearity between national income and environmental pollution: international evidence of Kuznets curve," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 20(1), pages 179-210, January.
    11. Ethel Ansaah Addae & Dongying Sun & Olivier Joseph Abban, 2023. "Evaluating the effect of urbanization and foreign direct investment on water use efficiency in West Africa: application of the dynamic slacks-based model and the common correlated effects mean group e," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 25(7), pages 5867-5897, July.

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