Non-separability and heterogeneity in integrated agronomic-economic analysis of nonpoint-source pollution

This paper highlights two aspects that are crucial in the management of agricultural nonpoint-source pollution but that are typically not taken into account in applied economic studies. Firstly, production, pollution and abatement are to be treated as non-separable to include control options provided by changes in production practices. Besides, non-separability enables proper account to be taken of the material flow through production processes and changes the perspective on optimal environmental regulations. Secondly, the resolution or level of spatio-temporal aggregation should capture the heterogeneity in the economic and ecological attributes (production condition, fixed but allocatable inputs and technology set) of the individual decision-maker's policies they intend to influence. The implications of non-separability and heterogeneity for empirical studies and for policy are illustrated by two simulation studies on nitrogen and pesticide use in crop farming.