In economics, structural change is a shift or change in the basic ways a market or economy functions or operates. Such change can be caused by such factors as

economic development In economics, economic development (or economic and social development) is the process by which the economic well-being and quality of life of a nation, region, local community, or an individual are improved according to targeted goals and object ...

, global shifts in capital and labor, changes in resource availability due to war or natural disaster or discovery or

depletion of natural resources Resource depletion occurs when a natural resource is consumed faster than it can be replenished. The value of a resource depends on its availability in nature and the cost of extracting it. By the law of supply and demand, the scarcer the reso ...

, or a change in political system. For example, a

subsistence economy A subsistence economy is an economy directed to basic subsistence (the provision of food, clothing and shelter) rather than to the market. Definition "Subsistence" is understood as supporting oneself and family at a minimum level. Basic subsiste ...

may be transformed into a

manufacturing Manufacturing is the creation or production of goods with the help of equipment, labor, machines, tools, and chemical or biological processing or formulation. It is the essence of the secondary sector of the economy. The term may refer ...

economy, or a regulated

mixed economy A mixed economy is an economic system that includes both elements associated with capitalism, such as private businesses, and with socialism, such as nationalized government services. More specifically, a mixed economy may be variously de ...

may be liberalized. A current driver of structural change in the world economy is

globalization Globalization is the process of increasing interdependence and integration among the economies, markets, societies, and cultures of different countries worldwide. This is made possible by the reduction of barriers to international trade, th ...

. Structural change is possible because of the dynamic nature of the

economic system An economic system, or economic order, is a system of production, resource allocation and distribution of goods and services within an economy. It includes the combination of the various institutions, agencies, entities, decision-making proces ...

. Patterns and changes in sectoral employment drive demand shifts through the income elasticity. Shifting demand for both locally sourced goods and for imported products is a fundamental part of development. The structural changes that move countries through the development process are often viewed in terms of shifts from primary, to secondary and finally, to tertiary production. Technical progress is seen as crucial in the process of structural change as it involves the

obsolescence Obsolescence is the process of becoming antiquated, out of date, old-fashioned, no longer in general use, or no longer useful, or the condition of being in such a state. When used in a biological sense, it means imperfect or rudimentary when comp ...

of skills, vocations, and permanent changes in spending and production resulting in

structural unemployment Structural unemployment is a form of involuntary unemployment caused by a mismatch between the skills that workers in the economy can offer, and the skills demanded of workers by employers (also known as the skills gap). Structural unemployment is ...

Examples

Historically, structural change has not always been strictly for the better. The

division of Korea The division of Korea began at the end of World War II on 2 September 1945, with the establishment of a Soviet occupation zone and a US occupation zone. These zones developed into separate governments, named the Democratic People's Republic of ...

and the separate paths of development taken by each

state State most commonly refers to: * State (polity), a centralized political organization that regulates law and society within a territory **Sovereign state, a sovereign polity in international law, commonly referred to as a country **Nation state, a ...

exemplifies this.

Korea under Japanese rule From 1910 to 1945, Korea was ruled by the Empire of Japan under the name Chōsen (), the Japanese reading of "Joseon". Japan first took Korea into its sphere of influence during the late 1800s. Both Korea (Joseon) and Japan had been under polic ...

was relatively uniform in economic structure, but after

World War II World War II or the Second World War (1 September 1939 – 2 September 1945) was a World war, global conflict between two coalitions: the Allies of World War II, Allies and the Axis powers. World War II by country, Nearly all of the wo ...

, the two countries underwent drastically different structural changes due to drastically different political structures.

South Korea South Korea, officially the Republic of Korea (ROK), is a country in East Asia. It constitutes the southern half of the Korea, Korean Peninsula and borders North Korea along the Korean Demilitarized Zone, with the Yellow Sea to the west and t ...

's economy before the 1950s mostly consisted of

agriculture Agriculture encompasses crop and livestock production, aquaculture, and forestry for food and non-food products. Agriculture was a key factor in the rise of sedentary human civilization, whereby farming of domesticated species created ...

. During the 1960s and 1970s, Korea began to change their structure to IT, micro systems technology, and also services. More than 50% of the world uses a

Samsung Samsung Group (; stylised as SΛMSUNG) is a South Korean Multinational corporation, multinational manufacturing Conglomerate (company), conglomerate headquartered in the Samsung Town office complex in Seoul. The group consists of numerous a ...

smartphone, whose headquarters are located there. Today, South Korea's economy is the 15th strongest economy system. In the Ruhr Area (Ruhrgebiet) in

Germany Germany, officially the Federal Republic of Germany, is a country in Central Europe. It lies between the Baltic Sea and the North Sea to the north and the Alps to the south. Its sixteen States of Germany, constituent states have a total popu ...

, the economy was mostly marked by coal and steel industry. During and after the coal crisis began in the 1960s and 1970s, this area started to change its economic structures to services, IT and

logistics Logistics is the part of supply chain management that deals with the efficient forward and reverse flow of goods, services, and related information from the point of origin to the Consumption (economics), point of consumption according to the ...

. The city

Dortmund Dortmund (; ; ) is the third-largest city in North Rhine-Westphalia, after Cologne and Düsseldorf, and the List of cities in Germany by population, ninth-largest city in Germany. With a population of 614,495 inhabitants, it is the largest city ...

opened the first technology center named "Technologiepark Dortmund" in the 1980s. Companies including Signal Iduna and Wilo are based there. Structural change can be initiated by policy decisions or permanent changes in resources, population or the society. The downfall of communism, for example, is a political change that has had far-reaching economic implications.

Structural changes in employment

Image:US employment by sectors, both genders.png, US employment by sectors, both gender

Economic structural changes impact also on employment. A developing economy typically reveals a high share of employment in the

primary sector The primary sector of the economy includes any industry involved in the extraction and production of raw materials, such as farming, logging, fishing, forestry and mining. The primary sector tends to make up a larger portion of the economy in d ...

, while the share of employment in the

tertiary sector The tertiary sector of the economy, generally known as the service sector, is the third of the three economic sectors in the three-sector model (also known as the economic cycle). The others are the primary sector (raw materials) and the ...

is high in an advanced/developed economy.

Testing econometric models for structural change

Structural change tests are a type of

econometric Econometrics is an application of statistical methods to economic data in order to give empirical content to economic relationships. M. Hashem Pesaran (1987). "Econometrics", '' The New Palgrave: A Dictionary of Economics'', v. 2, p. 8 p. 8� ...

hypothesis test. They are used to verify the equality of coefficients across separate subsamples of a

data set A data set (or dataset) is a collection of data. In the case of tabular data, a data set corresponds to one or more table (database), database tables, where every column (database), column of a table represents a particular Variable (computer sci ...

References

{{Authority control Business cycle *

Examples

Structural changes in employment

Testing econometric models for structural change

See also

References