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Abstract
An adequate representation of the technological trend component of yield time series
is of crucial importance for the successful design of risk management instruments.
However, for many transition and developing countries, the estimation of the technological
trend is complicated by the joint occurrence of three phenomena: (i) a high
level of heterogeneity among different farms in a region; (ii) non-linear development
of technological change; and (iii) high yield variations as a consequence of high
exposure of rainfed agriculture to extreme weather events. Under these situations, the
usually applied approach to detrend crop yield data using Ordinary Least Squares is
known to be biased. Based on a unique data set of 47 farm yield data from northern
Kazakhstan, we evaluated different alternative approaches. First, we consider the use
of the MM-estimator, a robust regression technique for detrending. Second, we evaluate
the effect of adding information on extreme climate events as an additional regressor.
Finally, we consider combinations of the two former approaches and compare the
implications of the different aggregation level on trend estimations. The results reveal
the importance of using single farm yield data for detrending, because technical trends
in Kazakh wheat yields are highly farm-specific. Furthermore, our analysis shows that
the estimation of technological trends can be improved by incorporating weather
information in the regression model if time series of crop yield data contain severe
fluctuations due to occurrence of climatic extreme events. Thus, the presented analysis
contributes to an improved crop yield analysis for many developing and transition
countries facing similar conditions.