Private schools have become a mainstay in developing countries. The private market share in primary education in low-income countries has nearly doubled from 12% in 1990 to 22% in 2010 (World Bank, 2013). There is a long-running debate amongst academics and the policy community about how increased choice, through charter, voucher, or private schools, will affect the education system. School choice advocates expect higher parental satisfaction through choice and improvements in public schooling through competition. Skeptics are concerned about the loss of shared citizenship and the potential for further stratification as the government reduces its provider role in education. Despite the fact that both advocates and skeptics have focused many of their arguments on the potential impact of choice on the public school system, these consequences remain largely uninvestigated in developing countries. In the dissertation, I provide the first comprehensive analysis of how competition from private schools affects public schools in a developing South Asian country: Nepal. I utilize a mixed methods approach to analyze a unique competition- focused dataset compiled from extensive primary and secondary data collection. I find no evidence to suggest that public schools in Nepal have improved as result of private competition. However, there is a recent surge of quasi-private policies being implemented by public schools. I show that the key obstacles to improvement include not only well-known factors such as bureaucratic rigidities and financial constraints, but also lesser-recognized impediments such as direct political interference in the education sector and stigmatization of public schooling. In conclusion, the historical analysis of the Nepal context suggests that private competition is unlikely to automatically induce public school improvements in developing countries. However, the emergence of quasi-private policies in public schools suggests that competitive pressures coupled with accountability incentives can affect public school behavior. Thus, choice systems need to include well-timed accountability mechanisms and targeted financial and leadership supports to have an enduring productive impact on public schools.