We analyze the link between virtual water trade, that is, the flow of water embodied in the international trade of agricultural goods, and vulnerability to external shocks from the vantage point of network analysis. While a large body of work has shown that virtual water trade can enhance water saving on a global scale, being especially beneficial to arid countries, there are increasing concerns that openness makes countries more dependent on foreign food suppliers and, in this way, more prone to external shocks. Our evidence reveals that the increased globalization witnessed in the last three decades is not associated with the increased frequency of adverse shocks (in food production). Furthermore, building on recent advances in network analysis that connect the stability of a complex system to its topological features, we find that the world is more interconnected, but not necessarily less stable.Keywords: virtual water; international trade; vulnerability; complex networks; agricultural production shocks JEL codes: F14, F18, Q25, Q56 Acknowledgements Financial support received through the project "The global virtual-water network: social, economic, and environmental implications" (FIRB -RBFR12BA3Y) funded by the Italian Ministry of Education, University and Research (MIUR) is gratefully acknowledged. The authors thank Francesco Laio and Stefania Tamea for providing the data on virtual water trade, Andrea Fracasso for insightful comments on an earlier draft of the paper, two anonymous referees and the Journal Editor for their suggestions and valuable inputs. 2
IntroductionThis paper investigates whether the globalization of food trade has made the world more vulnerable to shocks and, as a result, whether there is a trade-off between stability and openness. To do so we exploit the insights provided by network analysis: we study the structural features of the web of bilateral trade flows in agricultural goods -and the associated flows of virtual water-to ascertain whether they have evolved in a way that makes the world system more (or less) prone to large disruptions. In our endeavor, we relate to several streams of the existing literature, and interweave them to provide novel and original insights on the relationship between international trade and food security. The idea of measuring the water 'embodied' in goods, and 'virtually' traded from one country to another when goods are sold across borders, has been introduced by Allan (1993). In his seminal study, Allan describes virtual water (VW) trade as a market-mediated mechanism that enables water-scarce regions to cope with water scarcity (and food security) over the past few decades. (2012), the temporal evolution of the virtual water network is also analyzed, showing the progressive intensification of VW exchanges and the geography of these variations. We contribute to this literature by linking the topological features of the global network of VW trade to the resilience of the world system to shocks. In fact, the relationship between network topolog...