Structural Properties Evolution and Influencing Factors of Global Virtual Water Scarcity Risk Transfer Network

Abstract

Loss of production due to local water scarcity, i.e., Local Water Scarcity Risk (LWSR), is transferred downstream through international supply chains to distant economies, causing potential economic losses to countries and sectors that do not directly experience actual water scarcity, which is defined as Virtual Water Scarcity Risk (VWSR). Much research has focused on assessing VWSR and characterizing the structure of VWSR transfer networks, without explaining the formation and dynamics of VWSR transfer network patterns. In this study, the global VWSR transfer networks for 2001–2016 are then constructed based on a multi-regional input-output model and complex network theory. The determinants influencing the formation of VWSR transfer networks are further explored using the time-exponential random graph model. The results demonstrate that: (1) The VWSR transfer networks exhibit a distinctly small-world and heterogeneous nature; (2) Asia and Europe are the main targets of VWSR transfers, and Asia is also the main source of risks; (3) China and the USA play a leading role on the import side of VWSR, and India is the largest exporter of VWSR; (4) The evolution of VWSR transfer networks is significantly influenced by transitivity and stability. Countries located on the same continent, sharing geographical borders and having a higher level of economic development, have a facilitating effect on the formation and evolution of VWSR transfer networks. Countries with a higher share of merchandise trade are more inclined to receive VWSR inflows, while the urbanization rate has a restraining effect on VWSR outflows. The study provides a network-based insight that explores the structural evolution of VWSR transfer networks and the determinants of their formation, informing policy makers in developing strategies to mitigate the cascading spread of VWSR.