Roadways, Input Sourcing, and Patterns of Specialisation

We propose a model where the internal transport network facilitates the sourcing of intermediate goods from di¤erent locations. E¢ cient internal transportation promotes thus the growth of industries that rely on a large variety of inputs. The model shows that heterogeneities in internal transport infrastructures can become a key factor in shaping comparative advantage and specialisation. Moreover, when su¢ ciently pronounced, such heterogeneities may even overshadow more traditional sources of specialisation based on factor productivities. Evidence based on industry-level trade data grants support to the main prediction of the model: countries with denser road networks export relatively more in industries that exhibit wider input bases. We show that this correlation is robust to several possible confounding e¤ects proposed by the literature, such as the impact of institutions on specialisation in complex goods. Furthermore, we show that a similar correlation also arises when the density of the local transport network is measured by the density of their internal waterways, rather than by roadway density.