From the abstract:
This paper examines the consequences of international trade for long-run water resources and agricultural productivity. We use a large collection of global spatial data to show that—despite the widespread market failure caused by open access to water as an input with no market price—water-intensive agricultural activity is highly concentrated in water abundant locations, with few exceptions. We use a dynamic spatial equilibrium model of agricultural trade and water resources to quantify the policy consequences of this fact. Model counterfactuals show that international trade in agriculture prevents severe depletion of global water resources and accompanying long-run productivity declines, especially in dry places, by enabling specialization to follow comparative advantage. However, some observed trade liberalization episodes worsen depletion by exacerbating existing inefficiencies.
