This paper explores the effect of ethnic diversity on individual household decisions toinvest in schooling. Empirical evidence from rural Tanzania shows that a higher degree ofethnic diversity, measured by a tribal fragmentation index at the village level, is stronglyassociated with a lower propensity to invest in schooling at both the household and theindividual level. Supplementary qualitative and quantitative data is consistent with ourtheoretical model, that tribal homogeneity facilitates village cooperation on social sanctionslevied on educated migrants failing to remit to their parents in return for the parents’investment in schooling for the children