Resource use efficiency in agricultural production has been a major concern in Ethiopia. In this article data from 700 households in the central highland districts were used to assess farm-level resource use efficiency and to determine factors that influence inefficiencies in the production of teff (Eragrostis tef), wheat and chickpea, the major important crops in the country. The study established that smallholder farmers are resource use inefficient. Moreover, a two-limit Tobit regression model results reveal that inefficiency in resource use is positively and significantly affected by family size, farming experience and membership to associations. It is also found that those households whose decision makers have roles in their community activities show improved resource use efficiency. Moreover, the findings show that eliminating resource use inefficiency could contribute about 31.28% of the minimum annual income required for the sustenance of an average farm household. The study established that resource use efficiency and productivity gains are likely to be significantly improved through expansion of nonfarm sectors, reform of farmer related associations and integrating community leadership in various community activities and programs. Moreover, market infrastructure development would likely increase efficiency and agricultural productivity
