Global Virtual Water Trade: Integrating Structural Decomposition Analysis with Network Theory

The consideration of both the direct and the indirect effects of global production and trade is the first step in order to assess the sustainability of resource exploitation, in particular water usage. This paper applies the Global Multi-Regional Input-Output model to quantify the interdependencies of different sectors and to determine the overall water consumption of each country. This procedure allows the measurement of Virtual Water Trade, that is the volume of water embedded in traded goods. This paper introduces further extensions based on network analysis to overcome the limitations of I-O models. To the best of our knowledge, this is the first attempt to build a bridge between two different, but related, methodologies. Firstly, we assess the evolution of the structure of international trade in Virtual Water (VW). Secondly, we present the results from the Structural Decomposition Analysis. Finally, we introduce other measures from Network Theory, in order to integrate the previous results. Community Detection assessment reveals the emergence of regional VW systems composed by a limited set of countries. Thus our study confirms the need of elaborating and implementing transboundary policies for water management, especially in the European Union.