Surveys have shown that Zambian urban residents have significantly higher schooling attainment rates than rural residents and are more likely to be literate. To address this inequality in education outcomes it is important to understand to what extent this is a result of a resource gap (for example, differences in teachers or textbooks) or different returns on resources (for example, an additional teacher makes more of a difference in urban areas). To explore this idea this study performed an Oaxaca decomposition on the SACMEQ II data set for Zambia. The results showed that the rural–urban gap was attributable both to differences in the presence of resources (55% of the gap) and differences in the returns on resources (45% of the gap). Since returns on resources are considerably lower in rural areas, additional resource investment alone is unlikely to close the gap between rural and urban schooling outcomes.