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

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