Evolutionary models of parental investment often assume that negative effects of competition between offspring (i.e., quantity-quality trade-off effects) will be most apparent under conditions of resource scarcity. However, improvements in resource access associated with "modernization" may reduce levels of extrinsic environmental risk, creating a stronger association between parental investment and offspring success. Here we provide evidence that a rural development initiative in Ethiopia is associated with increased levels of parental investment in offspring status and increased levels of competition for this investment between siblings. Villages with access to an improved water supply, which have reduced levels of childhood mortality, are associated with higher investments in education, and the likelihood of offspring education is more determined by position within the family, compared to neighboring villages without access to water taps. However, there is no evidence of higher parental investment of base-level resources directly related to child health (indicated by childhood vaccination rates). Educational investment may be more sensitive to mortality changes, despite being costly and "surplus" to essential functions, because it has the potential to introduce the greatest economic payoffs for children, e.g., from jobs in an emerging wage-labour market. While tap villages are currently associated with a higher birth rate, we anticipate that in time, and with improved access to family planning, fertility will drop in response to shifts in environmental risk and improved pay-offs to strategies of high parental investment. These villages may be experiencing the initial stages of a demographic transition to small family sizes. (C) 2011 Elsevier Inc. All rights reserved.