This dissertation is concerned with the problem of low productivity and deficiency in the agricultural sector as it results in low farm income and rural poverty in the Ethiopian economy. This problem is of central concern for national economic development since agriculture which comprises 85% of the population forms the backbone of the country's economy. The prescriptive hypothesis made as a potential strategy for solving this crucial problem is that farm productivity can be increased by: (a) a more efficient use of traditional farm inputs and improvements in management capabilities of farmers that results in better planning and efficient resource allocation; (b) introduction of new and improved labor intensive technology in the form of improved plow and harrow for better soil cultivation and the use of fertilizer and improved seed that increase crop yields; (c) increased supply of operating capital to farmers in order to complement efficient allocation of traditional farm inputs and to make the use of new crop technology viable; and (d) availability of additional labor in hired and/or cooperative form during critical operations such as weeding, harvesting, and threshing to complement household labor;The findings which are obtained using the methods of linear and parametric programming applied to data on four average farms located in the four sub-areas of Chilalo province are qualitatively as follows: a considerable gap exists between the actual and optimal farm resource use and income on average farms and that substantial increases in productivity and farm income can be made if traditional resources are optimally used. Land is not a limiting resource to farm productivity after land reform, however before the March 1975 Revolutionary Land Reform, the average land cultivated by the majority of tenant farmers was less than 2 hectares. This quantity is less than optimal and therefore one of the major hindrances to improved farm productivity and income under the deposed feudal regime of Haile Selassie. Scarcity of labor during critical periods of harvesting, weeding and threshing limits farm income and productivity. Additional labor availability in hired and/or cooperative form enhances farm income and productivity. At high capital supply levels (K(,3) and K(,4)), the new technology is more efficient in production but at low capital levels (K(,1) and K(,2)) traditional technology becomes more efficient. Increasing capital supply levels from K(,1) = 75 B to K(,4) = 500 B results in increased net return per unit of labor, land, and capital on the four average farms. The results also show that the marginal value productivity schedules for capital are less elastic under traditional technology than when the traditional and new production technologies are combined. Furthermore, under the later alternative, the demand for capital is more elastic if hired labor is available in addition to household labor than if household labor is used exclusively in the production process.