Paul Krugman: Apple And Agglomeration

Apple And Agglomeration, by Paul Krugman, in NY Times:  The big Times article on Apple manufacturing was excellent, and I’ll have more to say about it when I have the time. One thing worth noting right away, however, is that the piece is in large part an essay on the economies of agglomeration(pdf, wonkish):

“The entire supply chain is in China now,” said another former high-ranking Apple executive. “You need a thousand rubber gaskets? That’s the factory next door. You need a million screws? That factory is a block away. You need that screw made a little bit different? It will take three hours.”

The point is that manufacturing plants don’t exist in isolation; they benefit a lot from being part of a manufacturing cluster, with specialized suppliers and a large pool of workers with the right skills close at hand. This is the kind of stuff I emphasized in my own work on both trade and economic geography.

The policy implications aren’t as clear as you might imagine. But more about that when I have time to do it right.

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