Economic sector

Economic sectors
Three-sector hypothesis
Primary sector: raw materials Secondary sector: manufacturing Tertiary sector: services
Theorists
Colin Clark · Jean Fourastié
Additional sectors
Quaternary sector · Quinary sector
Sectors by ownership
Business sector · Private sector · Public sector · Voluntary sector

This figure illustrates the percentages of a country's economy made up by different sectors based on its level of income or development. The primary sector extracts raw materials. The secondary sector is the conversion of raw materials into manufactured goods. The tertiary sector is the provision of services rather than manufacture of goods. The figure illustrates that countries with higher levels of socio-economic development tend to have less of their economy made up of primary and secondary sectors and more emphasis in tertiary sectors. The less developed countries exhibit the inverse pattern.

An economy may include several sectors (also called industries), that evolved in successive phases.

• The ancient economy was mainly based on subsistence farming.

• The industrial revolution lessened the role of subsistence farming, converting it to more extensive and monocultural forms of agriculture in the last three centuries. Economic growth took place mostly in mining, construction and manufacturing industries.

• In the economies of modern consumer societies, services, finance, and technology — the knowledge economy — play an increasingly significant role.

Even in modern times, developing countries tend to rely more on the first two sectors, compared to developed countries.

According to those who separate the tertiary sector into two distinct entities, modern economies are characterized as having four main sectors of activity:^{[citation needed]}

• Primary sector of the economy: Involves the retrieval and production of raw materials, such as corn, coal, wood and iron. (A coal miner and a fisherman would be workers in the primary sector.)
• Secondary sector of the economy: Involves the transformation of raw or intermediate materials into goods e.g. manufacturing steel into cars, or textiles into clothing. (A builder and a dressmaker would be workers in the secondary sector.)
• Tertiary sector of the economy: Involves the supplying of services to consumers and businesses, such as baby-sitting, cinema and banking. (A shopkeeper and an accountant would be workers in the tertiary sector.)
• Quaternary sector of the economy: Involves the research and development needed to produce products from natural resources. (A logging company might research ways to use partially burnt wood to be processed so that the undamaged portions of it can be made into pulp for paper.) Note that education is sometimes included in this sector.

By ownership

An economy can also be divided along different lines:

• Public sector or state sector
• Private sector or privately-run businesses
• Social sector or Voluntary sector

See also

• North American Industry Classification System - a sample application of sector-oriented analysis
• Economic development