| dc.description.abstract | Many world regions are rapidly being exposed to water scarcity and will face challenges of water shortages in the future. A crude approach suggests that one way of dealing with the regional scarcity is through freshwater trade. Trade allows for reallocating limited resources to regions with higher marginal pay-off. The potential gains from freshwater trade, and therefore its occurrence, is determined by a large set of factors, of which this thesis will focus upon trade costs and relative endowment differences across regions. The thesis presents a model of freshwater trade where trade costs ensures that the factor price equalization of standard presentations of Heckscher-Ohlin models does not hold, and consequently that goods trade does not fully exploit the potential gains from trade. Theoretically one finds that the gains of freshwater trade increases as trade costs of freshwater decreases compared to those of other goods or if differences in factor endowment increase. Examining empirical data and trends on regional freshwater scarcity, virtual water flows, trade costs and the potential of industrial scaled desalination the thesis sketch where the potential of freshwater trade appears most prominent. Combining the above some trade flows stand as particularly likely; a North-South freshwater trade within Europe, trade flows from Canada to the United States and potentially extending also to Latin America and Russian freshwater export to both Europe, central Asia and the Middle East. Enhanced freshwater trade is in addition very likely to occur in Australia and within other countries with existing freshwater markets. Using the implementation of 'the Basin Plan' in 2012 and applying a difference-in-differences approach to interregional freshwater trade in the Australian Murray-Darling basin, the thesis examine the effect of trade costs on freshwater trade. Data suggests that a reduction in trade costs does increase trade volumes from Victoria to South Australia. | en_US |