Abstract
The concept of virtual water – the amount of water used during the entire production chain of goods – represents a new tool for policymakers in water-scarce countries to shape policies in ways that improve water use efficiency. The present study extends work on the virtual water concept by testing a causality relationship between national water savings and economic growth of a water scarce country. Results of this study are twofold: (1) average annual precipitations explain the virtual water trade pattern in Mexico, and (2) there exists a Granger-causality relationship between agricultural and industrial growth and the annual volume of water saved in Mexico due to its acquisition of water-intensive crops from its North American Free Trade Agreement partners – Canada and the United States.
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