Gray water and environmental externalities: international patterns of water pollution through a structural decomposition analysis

In order to provide insights on the dynamics of water pollution worldwide, this paper analyzes the main drivers of gray water discharge during the 1995–2009 period and the effort on reducing gray water compared to other environmental externalities. Based on the World Input-Output Database, a structural decomposition analysis (SDA) of gray water generation shows that domestic demand for food is the main driver of gray water changes in all countries, while relocation of industrial activities to developing nations has disproportionally transferred this burden from developed countries' manufacturing industries. This paper also introduces a novel hybrid multiplicative-additive SDA that overcomes the issue of distributing large interaction terms in standard additive models and allows simulating mitigation scenarios.