This paper investigates how community management of schools can affect educational outcomes, such as retention and repetition rates. In our model, parents make decisions about whether their children should remain in school or not, and they monitor the performance of the teachers. To test the theoretical implications, we use a unique data set from El Salvador, which has recently expanded the role of communities in school management through its EDUCO program. We find that EDUCO has a positive and robust influence on students, encouraging them to continue their schooling. Our results suggest that community participation is largely responsible for the positive effect of the EDUCO program. The better classroom environment and careful teacher management under the EDUCO program also seem to contribute to the positive results. We conclude that in El Salvador, decentralization of responsibilities to communities has had significant positive effects on educational outcomes.