Diffusion of soil pollution in an agricultural economy. The emergence of regions, frontiers and spatial patterns

The Status of the World's Soil Resources Report identi_ed in 2015 soil pollution as a major threat to all the services provided by soils (FAO and ITPS, 2015). This paper develops a spatial growth model for an agricultural economy where pollution di_uses in the soil. In order to produce, the economy needs fertile soil, which is naturally bounded by the amount of available land. Although production entails pollution, locations can protect their soil investing in abatement. Once a location reaches its maximum of fer- tile land, the economy is split into a fertile region and a polluted region, separated by a dynamic frontier which follows the spatial evolution of pollution. After providing the optimal trajectories for consumption and fertile land, we prove that heterogenous steady states can emerge even in homogeneous economies, and that a polluted region can stag- nate forever in an environmental poverty trap. Our results are numerically illustrated, including examples of the economy's resilience to pollution shocks.