Abstract At independence in 1991, Tajikistan enjoyed almost universal literacy, reflecting the legacy of social development achieved during the Soviet period. However, since then the country has undergone immense economic, political and social upheaval, including civil war. As a consequence, the gains of the past are quickly being eroded. Recent evidence suggests that school attendance rates are declining, the gender gap is widening, and there is increasing geographical variation. This paper uses a unique source of data to investigate the relative roles of individual, household, and contextual factors to determine whether or not a child attends basic education in Tajikistan. Applying multilevel modelling and geographical information system techniques, the results show that contextual factors have a strong effect on school attendance. In particular, the accessibility and availability of school services and the quality of education have a positive effect. However, the level of economic development of the community in which the child lives exerts a negative effect on school attendance, reflecting the influence of higher opportunity costs of education in terms of the opportunities for income‐generating activities forgone. This has implications for educational policy, highlighting that a joined‐up approach is necessary to foster local economic development and to lower school dropout rates. Copyright © 2009 John Wiley & Sons, Ltd.