Gray Water and Environmental Externalities: International Patterns of Water Pollution through a Structural Decomposition Analysis André Carrascal 1 , Regional Economics Applications Laboratory (REAL).- University of Illinois (USA) Institute of Development Studies of Galicia (IDEGA) – University of Santiago de Compostela (USC) E-mail: andre.carrascal@usc.es André F. T. Avelino Regional Economics Applications Laboratory (REAL).- University of Illinois (USA) Alberto Franco a, 2 Regional Economics Applications Laboratory (REAL).- University of Illinois (USA) Departamento Economía – University of Extremadura Área Temática: 6. Energía, sostenibilidad, recursos naturales y medio ambiente Resumen: While mitigation of greenhouse gases emissions has focused much of the interest at the international level due to the growing concern for global warming and climate change, water pollution has never been a major priority on political agendas. Moreover, in spite of new regulatory measures restricting industry and agricultural operations from pouring pollutants into lakes, streams, and rivers, around 1.1 trillion m 3 of wastewater were still disposed in waterways around the world in 2009. In order to provide insights on the dynamics of water pollution in the international context, this paper analyzes the main drivers of gray water discharge during the 1995-2009 period as well as the effort on reducing gray water compared to other externalities. Firstly, by performing a structural decomposition analysis (SDA) of gray water generation based on the World Input-Output Database (WIOD), we assess the impact of changes in intermediate industrial flows, domestic final demand, exports and water requirements. Secondly, we study the evolution of the gray water requirements ratio as a function of changes in the degree of water pollution over greenhouse gases emissions and changes in the overall sectoral pollution generation. Besides the empirical evidence on water pollution drivers currently lacking in the environmental literature, we also introduce a novel hybrid multiplicative-additive SDA that overcome the issue of distributing large interaction terms in standard additive models. Palabras Clave: Gray Water Footprint, Water pollution, WIOD, Input-Output, Structural Decomposition Analysis. Clasificación JEL: C67, Q53, R15. Abbreviations: SDA, Structural Decomposition Analysis; WIOD, World Input-Output Database. 1 Present address: University of Santiago de Compostela, Institute of Development Studies of Galicia (IDEGA), Avda. Das Ciencias, Chalet nº1. Campus Vida. 15782, Santiago de Compostela (Spain). 2 Present address: University of Extremadura, Centro Universitario de Plasencia, Avda. Virgen del Puerto nº2, 10600, Plasencia (Spain). E-mail: albertofranco@unex.es .