This article demonstrates that ethnic group segregation is a key determinant of public goods provision. This results from politicians’ strategic engagement in ethnic favoritism: when ethnic groups are geographically segregated, elites will target their coethnics with public goods, which are more efficient than private transfers when enough coethnics will benefit. We test this expectation with unusually fine-grained data from Malawi on the spatial distribution of ethnic groups, geolocated distributive goods (public and private), and the ethnic identities of political elites. We find evidence that ethnic group segregation increases ethnic favoritism and local public goods provision, even in diverse settings, while investments and favoritism in private goods decrease with segregation. Our logic and evidence
provide a novel elite-driven explanation for the considerable variation in ethnic favoritism and the under-provision of public goods in ethnically diverse settings.