Brazil's agricultural sector underwent major changes in the past two decades. Though Brazil is abundant in labor, land, and animal power, government subsidies encouraged the use of fertilizer and machines. Since productivity growth arises from technical change, Brazil's drive to modernize its agricultural sector should improve agricultural productivity. However, inefficient production practices arising from subsidies can slow multifactor productivity growth. Recent removal of agricultural subsidies in Brazil has coincided with increased productivity, providing evidence that input subsidies made Brazilian agriculture inefficient.