Because of limited governmental resources in Africa, communities are often left in charge of managing their own schools. Two theories of African community’s ability to engage in collective action and improve quality of schools have emerged. While cross-country evidence underlines ethnic divisions as a key limit to collective action in Africa, field work suggests that social capital (i.e. the community’s ability to engage in collective action or establish shared norms) is the main driver of the quality of local public goods. In this paper, we use Afrobarometer data to test the role of social capital and ethnic divisions in determining the quality of schools.
We capture social capital by the average level of trust and ethnic divisions via an index of ethnic fractionalization. We skirt reverse causality problems between trust and quality of public goods by using historical information on the settlement patterns of ethnic groups in Sub-Saharan Africa. This yields measures of ethnic inherited trust which we use as an instrument for trust. To address concerns about endogenous residential sorting, we instrument ethnic fractionalization by the initial population density of ethnic historical homelands. We find that a one percent increase in the local level of trust increases the quality of local public goods by 0.2 to 1.14 percent. After controlling trust we discover ethnic fragmentation plays only a marginal role.