Structural change and economic complexity in Brazil’s manufacturing sector: evidence across the states (2011–2019)

Abstract This paper examines structural changes in manufacturing across the 27 Brazilian states between 2011 and 2019. We combine three complementary approaches, namely, shift-share analysis, structural decomposition analysis (SDA) based on interregional input–output tables, and regional economic complexity indicators, to investigate the relationships between manufacturing employment dynamics, regional competitiveness, and productive sophistication. The results reveal substantial spatial heterogeneity in industrial performance. Shift-share analysis shows that most of the traditionally industrialized states remained specialized but lost competitive dynamism. The SDA results indicate that technology-related and production-structure changes exerted predominantly negative effects on manufacturing employment across states, reflecting labor-saving restructuring processes. Positive demand-side effects, particularly exports, only partially compensated for these employment losses. Changes in regional economic complexity were also unevenly distributed. All northeastern states experienced declines in the regional economic complexity index (ECI-R), whereas the southern states of Santa Catarina, Rio Grande do Sul, and Paraná registered gains, and São Paulo maintained the highest complexity level throughout the period. Among the final-demand components, investment displayed the strongest association with changes in regional economic complexity. The findings suggest that Brazil's ongoing process of premature deindustrialization has been accompanied by increasing regional disparities in productive capabilities. More broadly, this paper demonstrates the value of integrating structural, spatial, and complexity-based approaches to better understand regional industrial transformation and to inform place-based industrial policies.