In this paper, we document patterns of export diversification, its evolution over time, the drivers of export diversification, and its consequences for economic development. First, we show that trade costs—measured in terms of distance to trading centers and market access through a host of trading arrangement (multilateral, bilateral and unilateral)—are key drivers of diversification. Second, we provide evidence for a causal link from export diversification to development and show that an increase in the extensive margin of exports is much more effective in raising per capita income than increasing the intensive margin of exports. Third, we show that what is most effective for economic development is broadly mimicking the production structure of the US, especially in those industries where the US is the most productive.