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Abstract
This paper contributes to the productivity literature in developing country agriculture by quantifying the level of
efficiency for a sample of peasant farmers from Eastern Paraguay. A stochastic efficiency decomposition methodology
is used to derive technical, allocative and economic efficiency measures separately for cotton and cassava. An
average economic efficiency of 40.1% for cotton and of 52.3% for cassava is found, which suggests considerable
room for productivity gains for the farms in the sample through better use of available resources given the state of
technology. Gains in output through productivity growth have become increasingly important to Paraguay as the
opportunities to bring additional virgin lands into cultivation have significantly diminished in recent years. No clear
strategy to improve farm productivity could be gleaned from an examination of the relationship between efficiency
and various socioeconomic variables. One possible explanation for this finding is the existence of a stage of
development threshold below which there is no consistent relationship between socioeconomic variables and
productivity. If this is the case, then our results suggest that this sample of Paraguayan peasants are yet to reach such
a threshold. Hence, improvements in educational and extension services, for example, would be needed to go beyond
this threshold. Once this is accomplished, additional productivity gains would be obtained by further investments in
human capital and related factors.