Classification Using the Economic Sector

Key Concepts

• Business Sectors: Businesses are classified based on the sector they operate in:

  • Primary Sector: Extraction of raw materials (e.g., farming, mining, fishing).
  • Secondary Sector: Processing of raw materials and manufacturing (e.g., oil refinement, vehicle manufacture).
  • Tertiary Sector: Provision of services (e.g., banking, hospitality).

• Chain of Production: Steps to transform raw materials into finished products.

Changes in Sector Importance

Economic Growth and Sector Shift

• Sectoral Change: As economies grow, firms tend to move from primary to secondary and tertiary sectors.
  • Added Value: Higher value and profits in subsequent sectors.

Less-Developed Economies

• Focus mainly on primary sector with high employment in agriculture.
• Examples: Ethiopia, Laos, Afghanistan.
• Global trend moving away from primary sector employment.

Emerging Economies

• Shift from primary to secondary sector due to technological improvements.
• Growth in tertiary and quaternary sectors (e.g., Vietnam, Cambodia).
• Businesses attracted by lower wages in these regions.

Developed Economies

• Dominance of the tertiary sector and growing focus on quaternary sector (knowledge-based services).
• High employment in service provision (e.g., US, Germany).
• Some countries remain significant in primary sectors (e.g., Australia, Norway).

Employment Trends and Sector Analysis

• Primary Sector: Decline in employment globally, except in less-developed countries.
• Secondary Sector: Growth in emerging economies, stability in others like Brazil and Turkey.
• Tertiary Sector: High employment in developed economies, significant in the US and Germany.

Graph Analysis

1. Primary Sector

   • High employment in primary sector in less-developed economies.
   • Example: Malawi highest employment in primary sector.

2. Secondary Sector

   • China leads in secondary sector employment growth.

3. Tertiary Sector

   • US and Germany have high tertiary sector employment.
   • Thailand's service sector saw significant growth between 1991 and 2019.

Examiner Tips

• Tertiary sector jobs are not always higher paid than secondary sector jobs.
• Value-added is higher in tertiary sector, but pay can be low (e.g., hospitality).
• High wages in secondary sectors in countries like Germany and Norway.

Conclusion

• Economic development typically leads to a shift from primary to tertiary sectors.
• Understanding sectoral changes and employment trends is crucial for analyzing economic development.

Last updated: 12 June 2024

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