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This study focuses on the quantification of pesticide use efficiency for producers of transgenic cotton versus conventional cotton in order to test for the improvement promised by the genetically engineered crop. The environmental and cost efficiency of pesticide use is assessed by means of data envelopment analysis (DEA) and the external effects of pesticide are quantified by means of the pesticide leaching potential. To account for the fact that conditions other than the ‘treatment” (seed type) are not equal in farm surveys the study employs a second step Tobit regression. The data are from a survey of cotton growers in North Carolina, USA. Differences in environmental efficiency are found to be significant between herbicide tolerant and stacked gene (herbicide tolerant and insect resistant) cotton and between stacked gene and conventional cotton. In contrast, no statistically significant differences are found for …