Interplay of crop diversity and agricultural area in agroecosystem services: Analytical and empirical study on local water quality

Abstract This study expands the framework for analyzing the interplay of agricultural area and crop diversity on agroecosystem services by incorporating the species‐area relationship concept from biology. We estimate panel fixed effects models that include both agricultural area and crop diversity, along with their interaction term. This approach allows us to derive a crop diversity threshold‐the point at which agricultural land no longer exerts a negative marginal effect on water quality, driven by adjustments along the intensive margin rather than the extensive margin. By replicating well‐established water quality models from the literature and conducting robustness checks, we validate this framework. Our results empirically demonstrate that crop diversity can mitigate the adverse impact of agricultural land on water quality, aligning with the goals of conservation programs. This framework provides a more comprehensive understanding of agriculture's non‐unidirectional contributions to water quality, rather than only negative impacts, which are pervasive in the literature. Moreover, the thresholds identified in this study provide valuable insights for prioritizing regions for landscape‐based, crop diversity‐driven conservation strategies and policy design.