Can ethnically distinct communities ruled through “traditional” assemblies provide public goods and services better, than when they are ruled by leaders elected through “modern” multiparty elections? We exploit a unique institutional feature in the state of Oaxaca, Mexico, where municipalities are ruled by traditional governance institutions, to explore the effect of these forms of governance on the provision of public goods. Using locality-level census data, we study the provision of local public goods through a geographic discontinuity approach. We demonstrate that communities ruled by traditional governance practices offer more effective provision of local public goods than equally poor communities ruled by political parties. Relying on qualitative fieldwork and household surveys, we argue that the significant differences in the provision of public goods according to governance regime derive from community practices that solve collective action problems, enhance citizen participation in public decisions, and restrain elite capture.