[1] Yes, the effect of road construction on fires concentrates in high rice/sugar regions. This suggests that the mechanism linking roads to fires is related to the cultivation of these crops, as roads likely reduce the cost of transporting them to market, making mechanized harvesting (which leaves flammable stubble) more profitable.

[2] The subgroup analysis is informative because it tests the paper's proposed mechanism. By showing that the effect of road construction on fires is concentrated in regions that grow rice or sugarcane, it provides evidence that the mechanism is related to the cultivation of these crops. This differs from simply adding an interaction term because it allows for a more flexible specification of the interaction, as well as the ability to estimate the effect separately for each subgroup.