The dynamics of spatial pollution: The case of phosphorus runoff from agricultural land

The paper analyzes, based on a land classification system, the optimal management of negative production externalities while taking into account the intertemporal and spatial aspects of the problem. To incorporate both aspects simultaneously, a two-stage modeling approach is proposed where the solution of the spatial problem (first stage) is optimized over time (second stage). As a result, it is possible to relate long-run and short-run supply and input demand functions. Attention is given to runoffs from agricultural land leading to the contamination of a water body, in particular, the one of phosphorus and the eutrophication of lakes. The employment of a land classification system supports a full-information approach and allows to address the optimal management of mineral fertilizer and manure based on zonal taxes, zonal permits, and zonal standards which all vary over time. (C) 2000 Elsevier Science B.V. All rights reserved.