3.

6 A methodological approach to obtain a statistical equation

Some parametric and non-parametric models have been employed to examine the impact of climate on crop
yield. Some non-parametric models such as regression trees and neural network have been used to estimate the impact
of climate on crop yield. For example, Lobell, Ortiz-Monasterio, Asner, Naylor, and Falcon (2005) applied regression
trees to estimate the impact of climate on wheat yield variability That study could capture a non-linear relationship
between management practices and wheat yield variability.
Another study (Khairunniza-Bejo, Mustaffha, & Ismail, 2014) explain that artificial neural network (ANN)
can capture any non-linear association between production input and crop yield and ANN performance may be better
in predicting crop yield.
Although non-parametric models might capture the impact of climate on crop yield, those model have some
shortcomings. The first shortcoming is that non-parametric models are not allowing scientists to extrapolate away
from the samples (Horowitz, 2009; Kvam & Vidakovic, 2007). The second shortcoming is that non-parametric models
are relatively difficult to be displayed or be communicated to readers (Horowitz, 2009). On the other hand, parametric
models are easy to interpret and are more appropriate if the models pass statistical assumptions. For these reasons, this
study applies parametric models to estimate the impact of climate change on crop yields.
Moreover, there are three forms of parametric statistical equations or parametric statistical models to
estimate impacts of climate change on rice yields (Lobell & Burke, 2010a). Firstly, a log-linear function (Gomez &
Iglesias, 2005; Lee, Nadolnyak & Hartarska, 2012; Lobell, Schlenker & Roberts, 2011). Secondly, a model with time
variables (Lobell, Bonfils & Duffy, 2007; Lobell & Burke, 2008; Lobell & Burke, 2010a; Wang, Chang, Lu, Chang &
Tan, 2012). Thirdly, a first differencing equation. These equations may contain two variable types, namely, climate
and production factors.
In this study, a model with time variables and a model of the first differenced variables will be employed. A
model with time variables is a model employing, at least, one time variable as an independent variable. The
application of a model with time variables stems from a fact that crop yields may be increased by technological
progress. Hence, time variables as independent variables represent technological progress in crop yield.
In general, scientists involve time variables to capture the impact of technological progress based on
historical data and then, the impact of technological progress is applied in observing the impact of climate change in
future. A possible benefit in applying time variables is to compare the impact of climate change on two facets: the
impact of climate change under significant technological progress and the impact of climate change without
technological progress (Lobell & Burke, 2010).

In the term of the first-differenced models, a model of the first-difference method is a model that employs
the first differenced variables: the first differenced independent and the first differenced dependent variables. Differ
from a model with time variables, a first-differenced model explains crop yield without significant technological
progress.
By implementing both equations, a model with time variables and a model of the first difference method,
this study can address the impact of climate change on the rice supply chain under two possible futures, significant
technological progress and in significant technological progress.
Both equations and model may include the production inputs and climate that may affect Indonesian rice
yields, such as fertilizer (Ambarinanti, 2007), seed, capital and labor (Mariyono, 2009). Climate such as rainfall and
temperature will be included because of two reasons as several studies successfully apply these variables (Lobell et
al., 2007; Lobell & Burke, 2008; Lobell & Burke, 2010a; Wang et al., 2012).
Figure 3.3 explains some statistical tests will be applied to assess adequacy of both models. Assessing the
models or equations aims to clearly prove that equations capture the essences of the subject under study (Gujarati,
2004). These models are the best equations or the best models if and only they pass some statistical tests such as
autocorrelation, heteroscedasticity, significant of independent variables and high R 2 (Gujarati, 2004; Stark, 1997).
Regression models also are called the best models if models conform to the appropriate theoretical background.
1. Constructing scatter diagrams of rice yield over time to detect an appropriate pattern of equation (Gujarati,
2004; Stark, 2007; Baltagi, 2010). For instance, if rice yield is similar to a linear graph, an equation or model
to assess the impact of climate and production factors is a linear model;
2. Finding significant independent variables. To do this, all variables, are firstly differenced or detrended and
through correlation analysis, independent variables that significantly affect rice yield will be collected;
3. Regress rice yields of wetland and dryland farming with statistically significant variables to find appropriately
tentative models. If observed climate includes any climate threshold, embed squared terms of climate to
capture the negative and positive effect of climate as climate may positively (negatively) affect crop yield
under (over) any climate threshold;
4. Obtaining residuals from tentative models to apply some statistical tests such as normality test, autocorrelation
and heteroscedasticity. If models pass normality test (Jarque-Bera), heteroscedasticity (White test);
autocorrelation (Breusch- Godfrey serial correlation), multicollinearity and a goodness of fit (F-test) then the
models adequately represents relationships among rice yields and independent variables (Gujarati, 2004);
5. The best models also should conform to appropriate theoretical background (Stark, 2007; Studenmund, 2005)

6. If tentative models do not pass either heteroscedasticity or autocorrelation test, change form models to next
appropriate models or transform data (Gujarati, 2004). In case models pass heteroscedasticity but fail to pass
autocorrelation, models may include a lagged dependent variable.
7. Restart to step 2.

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