Sialkot, Pakistan is the world center of hand-stitched soccer-ball production, home to roughly 130 firms, which produce for all major brands (Atkin et al 2015a, 2015b). At first blush, the existence of this cluster is puzzling. Pakistanis’ sporting passion is cricket; soccer has always been of marginal interest in the country. One might be tempted to dismiss the existence of a cluster where there is no apparent local demand as an anomaly, curious in itself but not indicative of a deeper pattern. But the phenomenon is not uncommon. For example, Sialkot is also a leading world producer of another not-particularly-Pakistani product: bagpipes (BBC, 2012).
The existence of the soccer-ball cluster seems to argue against a keystone of modern thinking about trade and development: what Krugman (1980) called the “home market effect,” the idea that countries will tend to export goods for which they have large domestic markets. But a closer examination of the history of the cluster reveals a subtler story. In this short paper, we draw on historical sources and interviews with firms to trace the development of the cluster from its origins in the late 19th century. Our main message is that the home market effect appears to have been important in creating the cluster under British rule and that agglomeration effects — as well as some effective industrial policy — led to continued growth of the sector even after the colonists (the main local source of demand) left the sub-continent. In the presence of agglomeration effects, in other words, a lack of contemporary local demand is not in itself an argument against home market effects. The case study underlines the importance of understanding longer-term historical dynamics for understanding the current pattern of specialization in the world economy — and industrial development more generally.
Atkin, David, Azam Chaudhry, Shamyla Chaudry, Amit Khandelwal, Tariq Raza, and Eric Verhoogen. "On the Origins and Development of Pakistan's Soccer-Ball Cluster." Columbia Business School, December 2015.
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