This paper uses product-level data to analyse how comparative advantage evolves as per capita income rises in a sample of twenty relatively rapidly growing countries. Evidence that output and exports become more diversified—not more specialised—as per capita income rises has been interpreted to suggest that comparative advantage does not evolve as theory predicts and has been taken as a basis for a revival of industrial policy in developing countries.

This paper presents evidence that comparative advantages does evolves as theory predicts and provides a reinterpretation of empirical finding of output and export diversification.