Do Sustainable Agricultural Practices Boost Production and Technical Efficiency? A Case Study of Coffee Smallholders in Peru

ABSTRACT Smallholder agriculture remains a cornerstone for economic development and poverty reduction in Latin America. Their transition to sustainable agricultural production is critical in the face of the environmental challenges posed by conventional farming practices and is a key pathway to achieving the United Nations' Sustainable Development Goals. This study examines the effects of Sustainable Agricultural Practices (SAP) adoption on coffee production and technical efficiency (TE) among smallholders in Peru, focusing on both observable and unobservable factors. Using a multistage framework, we employ propensity score matching to control for observable factors, estimate a Stochastic Production Frontier model with sample selection bias correction to control for unobservable factors, and assess technological differences using a metafrontier approach. Our analysis of pooled cross‐sectional data from 2017 to 2019 indicates that age, farm accessibility, and having Quechua as a first language are factors that make farmers more likely to adopt SAP. Although SAP adopters initially show higher production levels, the difference is not statistically significant after accounting for unobserved factors. However, SAP adopters utilize better technology and exhibit higher TE compared to non‐adopters, highlighting the potential benefits of promoting sustainable practices in smallholder agriculture.