Abstract This study examines the extent to which technical efficiency (TE) is related to activities promoted by two natural resource management programmes recently completed in Central America. Data for a total of 639 farms operating in the hillsides of El Salvador and Honduras are used to estimate a household‐level input‐oriented stochastic distance frontier simultaneously with a TE effects model. The main finding of this study is that improvements in TE are financially beneficial to farm households while also contributing to environmental sustainability. The results also reveal a positive association between productivity and output diversification, and a positive relationship between TE and off‐farm income, human capital and agricultural extension.
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