The nexus between road infrastructure and economic diversification: exploring its uneven impacts in Brazil

We examine the impact of road investments on regional diversification in Brazil, considering the moderating role of economic development, relatedness, and economic complexity. Using municipal and sector-level data from 2007 to 2018, we find that road infrastructure positively influences the emergence of new economic activities. However, our findings suggest that these effects vary across sectors, with stronger impacts on industries with higher technological intensity and complexity, suggesting an important role in structural transformation. Additionally, road investments contribute to reducing regional disparities, as their effects are more pronounced in areas with lower levels of GDP per capita, relatedness and complexity. Our study contributes to the literature by empirically assessing the relationship between infrastructure and economic diversification, examining sectoral heterogeneity, and evaluating the role of road investments in mitigating spatial inequalities in Brazil.