In this paper we examine more closely the factors associated with production inefficiency in
China's agriculture. The approach we take involves a two-stage process where output efficiency
scores are first estimated using data envelopment analysis, and then in the second stage,
variation in the resulting efficiency scores is explained using a truncated regression model with
inference based on a semi-parametric bootstrap routine. Among the results we find that a
heavy industrial presence is associated with reduced agricultural production efficiency and
may be an indication that externalities from the industrial process, such as air and ground
water pollution, affect agricultural production. We also find evidence that counties with a large
percentage of the rural labor force engaged in agriculture tend to be less efficient, and suggests
that nurturing and promoting growth of non-primary agriculture may lead to more efficient
use of labor resources in agriculture.