Can Developing Countries Gain from Defying Comparative Advantage? Distance to Comparative Advantage, Export Diversification and Sophistication, and the Dynamics of Specialization

Since the 1990’s, developing countries have tried to promote export diversification and sophistication, notably by attracting vertical FDI and by supporting the emergence of new industries whose factor content is distant from the country’s endowment. We investigate whether defying comparative advantage has prompted a more sophisticated and diversified export basket in a large panel of countries over the period 1992–2012. We find that developing...