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The three-sector model in
economics Economics () is a social science that studies the Production (economics), production, distribution (economics), distribution, and Consumption (economics), consumption of goods and services. Economics focuses on the behaviour and interact ...

economics
divides
economies An economy (from Greek Greek may refer to: Greece Anything of, from, or related to Greece Greece ( el, Ελλάδα, , ), officially the Hellenic Republic, is a country located in Southeast Europe. Its population is approximately 10.7 m ...

economies
into three sectors of activity: extraction of
raw material A raw material, also known as a feedstock, unprocessed material, or primary commodity, is a basic material that is used to produce goods, finished Product (business), products, energy, or intermediate materials that are feedstock for future finis ...
s (
primary Primary or primaries may refer to: Arts, entertainment, and media Music Groups and labels * Primary (band), from Australia * Primary (musician), hip hop musician and record producer from South Korea * Primary Music, Israeli record label Works * ...
),
manufacturing Manufacturing is the creation or Production (economics), production of goods with the help of equipment, Work (human activity), labor, machines, tools, and chemical or biological processing or formulation. It is the essence of secondary sector ...
(
secondary Secondary is an adjective meaning "second" or "second hand". It may refer to: * Secondary (chemistry), term used in organic chemistry to classify various types of compounds * The group of (usually at least four) defensive backs in gridiron football ...
), and
service Service may refer to: Activities :''(See the Religion section for religious activities)'' * Administrative service, a required part of the workload of university faculty * Civil service The civil service is a collective term for a sector of gove ...
industries which exist to facilitate the transport, distribution and sale of goods produced in the secondary sector (
tertiary Tertiary ( ) is a widely used but obsolete term for the Period (geology), geologic period from 66 million to 2.6 million years ago. The period began with the demise of the non-bird, avian dinosaurs in the Cretaceous–Paleogene extincti ...
). The model was developed by Allan Fisher,
Colin Clark
Colin Clark
, and
Jean Fourastié Jean Fourastié (; 15 April 1907 in Saint-Benin-d'Azy, Nièvre - 25 July 1990 in Douelle, Lot (department), Lot) was a France, French economist, notable for having coined the expression ''Trente Glorieuses'' ("the glorious thirty
ears The ear is the organ Organ may refer to: Biology * Organ (anatomy) An organ is a group of Tissue (biology), tissues with similar functions. Plant life and animal life rely on many organs that co-exist in organ systems. A given organ ...
) to descr ...
in the first half of the 20th century, and is a representation of an
industrial economy In economics Economics () is the social science that studies how people interact with value; in particular, the Production (economics), production, distribution (economics), distribution, and Consumption (economics), consumption of good ...
. It has been criticised as inappropriate as a representation of the economy in the 21st century. According to the three-sector model, the main focus of an economy's activity shifts from the primary, through the secondary and finally to the tertiary sector. Countries with a low
per capita income Per capita income (PCI) or total income measures the average income earned per person in a given area (city, region, country, etc.) in a specified year. It is calculated by dividing the area's total income by its total population. Per capita i ...
are in an early state of
development Development or developing may refer to: Arts *Development hell, when a project is stuck in development *Filmmaking#Development, Filmmaking, development phase, including finance and budgeting *Development (music), the process thematic material i ...
; the main part of their
national income A variety of measures of national income and output are used in economics Economics () is the social science that studies how people interact with value; in particular, the Production (economics), production, distribution (economics), distr ...

national income
is achieved through production in the primary sector. Countries in a more advanced state of development, with a medium
national income A variety of measures of national income and output are used in economics Economics () is the social science that studies how people interact with value; in particular, the Production (economics), production, distribution (economics), distr ...

national income
, generate their income mostly in the secondary sector. In highly developed countries with a high income, the tertiary sector dominates the total output of the economy. The rise of the
post-industrial In sociology Sociology is the study of society, human social behaviour, patterns of social relationships, social interaction, and culture that surrounds everyday life. It is a social science that uses various methods of Empirical method, e ...
economy in which an increasing proportion of economic activity is not directly related to physical goods has led some economists to expand the model by adding a fourth
quaternary The Quaternary ( ) is the current and most recent of the three periods of the Cenozoic The Cenozoic ( ; ) is Earth's current geological era An era is a span of time defined for the purposes of chronology or historiography, as in the regnal ...
or fifth
quinary sector The three-sector model in economics Economics () is the social science that studies how people interact with value; in particular, the Production (economics), production, distribution (economics), distribution, and Consumption (econom ...
s, while others have ceased to use the model.


Structural transformation according to Fourastié

Fourastié saw the process as essentially positive, and in ''The Great Hope of the Twentieth Century'' he wrote of the increase in
quality of life Quality of life (QOL) is defined by the World Health Organization The World Health Organization (WHO) is a specialized agency of the United Nations United Nations Specialized Agencies are autonomous organizations working with the United N ...

quality of life
, social security, blossoming of education and culture, higher level of qualifications, humanisation of work, and avoidance of
unemployment Unemployment, according to the OECD The Organisation for Economic Co-operation and Development (OECD; french: Organisation de Coopération et de Développement Économiques, OCDE) is an intergovernmental economic organisation with 38&nbs ...
. The distribution of the workforce among the three sectors progresses through different stages as follows, according to Fourastié:


First phase: Traditional civilizations

Workforce quotas: * Primary sector: 64.5% * Secondary sector: 20% * Tertiary sector: 15.5% This phase represents a society which is scientifically not yet very developed, with a negligible use of
machine A machine is any physical system with ordered structural and functional properties. It may represent human-made or naturally occurring device molecular machine A molecular machine, nanite, or nanomachine is a molecular component that produc ...

machine
ry. The state of development corresponds to that of European countries in the early
Middle Ages In the history of Europe The history of Europe concerns itself with the discovery and collection, the study, organization and presentation and the interpretation of past events and affairs of the people of Europe since the beginning of ...
, or that of a modern-day
developing country A developing country is a sovereign state A sovereign state is a polity, political entity represented by one centralized government that has sovereignty over a geographic area. International law defines sovereign states as having a perman ...
.


Second phase: Transitional period

Workforce quotas: * Primary sector: 40% * Secondary sector: 40% * Tertiary sector: 20% More machinery is deployed in the primary sector, which reduces the number of workers needed to produce a given output of food and raw materials. Since the food requirements of a given population do not change much, employment in agriculture declines as a proportion of the population. As a result, the demand for machinery production in the secondary sector increases and workers move from agriculture to manufacturing. The transitional way or phase begins with an event which can be identified with the
industrialisation Industrialisation ( alternatively spelled industrialization) is the period of social and economic change that transforms a human group from an agrarian society An agrarian society, or agricultural society, is any community whose economy is b ...

industrialisation
: far-reaching mechanisation (and therefore automation) of manufacture, such as the use of
conveyor belt A conveyor system is a common piece of mechanical handling equipment that moves materials from one location to another. Conveyors are especially useful in applications involving the transport of heavy or bulky materials. Conveyor systems allow ...

conveyor belt
s. The tertiary sector begins to develop, as do the
financial Finance is a term for the management, creation, and study of money and investments. Pamela Drake and Frank Fabozzi (2009)What Is Finance?/ref> Specifically, it deals with the questions of how an individual, company or government acquires money ...

financial
sector and the power of the state.


Third phase: Tertiary civilization

Workforce quotas: * Primary sector: 10% * Secondary sector: 20% * Tertiary sector: 70% The primary and secondary sectors are increasingly dominated by automation, and the demand for workforce numbers falls in these sectors. It is replaced by the growing demands of the tertiary sector, where productivity growth is slower.


Criticism of Fourastié's model

Various empirical studies seemingly confirm the three-sector hypothesis, but employment in the primary sector fell far more than Fourastié predicted. Germany's Federal Statistical Office study shows the following employment proportions for 2014: primary sector at 1.5%, secondary sector at 24.6%, and tertiary sector at 73.9%.Furthermore, four incorrect predictions can be found in his book on the subject:Jean Fourastié: ''Le Grand Espoir du XXe siècle. Progrès technique, progrès économique, progrès social''. Presses Universitaires de France, Paris 1949 (''The 20th century's Great Hope. Technological progress, economic progress, social progress.'' Fourastié predicted that the transition from the secondary to the tertiary sector would eliminate the problem of unemployment as, in his opinion, this sector could not be rationalized. When he conceived of the theory in the
1930s File:1930s decade montage.png, From left, clockwise: Dorothea Lange Dorothea Lange (born Dorothea Margaretta Nutzhorn; May 26, 1895 – October 11, 1965) was an American documentary photographer and photojournalist Photojournalism is a p ...

1930s
, however, he did not foresee the enormous technological progress made in the service sector, such as invention of the modern
computer A computer is a machine that can be programmed to Execution (computing), carry out sequences of arithmetic or logical operations automatically. Modern computers can perform generic sets of operations known as Computer program, programs. These ...
bringing with it the digital revolution. Fourastié's false prognosis is that there will be no country in the highly developed third phase which also has a significant secondary sector. The best example to counter this is Germany: in German economy, the secondary sector has sharply declined since the 1950s, but not quite to the level that Fourastié predicted due to Germany's high exports. Another Fourastié's false prediction states that the tertiary sector would always place high demands on employees in terms of education, which is not the case, since the service occupations also include cleaning services, shoeshining, parcel delivery service etc. The high level of income equality predicted by Fourastié also did not take place; in fact, the opposite development has happened: the inequality of income distribution has been increasing in most OECD countries. Fourastié described the tertiary sector - which is usually seen as equivalent with the service sector - as a production sector enjoying little to no technical progress and thus offering at best a slight increase in labor productivity. Confinement of the service sector within the tertiary sector today is only tenable in few areas. Instead, addition of the fourth "information sector" can be seen, leading towards the development of a
knowledge societyA knowledge society generates, shares and makes available to all members of the society knowledge that may be used to improve the human condition. A knowledge society differs from an information society in that the former serves to transform inform ...
.


Extensions to the three-sector model

Further development has led to the service or
post-industrial society In sociology Sociology is a social science Social science is the branch The branches and leaves of a tree. A branch ( or , ) or tree branch (sometimes referred to in botany Botany, also called , plant biology or phyt ...
. Today the
service sector The tertiary sector of the economy, generally known as the service sector, is the third of the three economic sector Image:Economic sectors and income.JPG, 250px, This figure illustrates the percentages of a country's economy made up by differen ...
has grown to such an enormous size that it is sometimes further divided into an information-based
quaternary sectorThe quaternary sector of the economy is based upon the economic activity that is associated with either the intellectual or knowledge-based economy . This consists of information technology; media Media may refer to: Physical means Communi ...
, and even a quinary sector based on human services.


Quaternary sector

The quaternary sector, sometimes referred to as the research and development sector, consists mainly of businesses providing information services, intellectual activities and knowledge based activities aimed at future growth and development. Activities include, and are mainly composed of: scientific research, ICT/computing, education, consulting, information management and financial planning. Contrary to what might be inferred from the naming convention, the quaternary sector does not add value to the outputs of the tertiary sector, but provides
services Service may refer to: Activities :''(See the Religion section for religious activities)'' * Administrative service, a required part of the workload of Faculty (academic staff), university faculty * Civil service, the body of employees of a governm ...
directly with limited reliance on purchased inputs. The output of the quaternary sector is difficult to measure. The volume of information produced has grown rapidly, in line with
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.


Quinary sector

Definitions of the quinary sector vary significantly. Some define it as merely non-profit work such as for
charities A charitable organization or charity is an organization whose primary objectives are philanthropy and social well-being (e.g. educational, religious Religion is a social system, social-cultural system of designated religious behaviour, b ...
and
NGO A non-governmental organization, or simply an NGO, is an organization An organization, or organisation (Commonwealth English The use of the English language English is a West Germanic languages, West Germanic language first ...

NGO
s. Others define it as the sector that focuses on human services and control, such as government and some charities, as well as creation or non-routine use of information and new technologies, linking slightly with the
quaternary sectorThe quaternary sector of the economy is based upon the economic activity that is associated with either the intellectual or knowledge-based economy . This consists of information technology; media Media may refer to: Physical means Communi ...
. Sometimes referred to as ‘gold collar’ professions, they include special and highly paid skills of senior business executives, government officials, research scientists, financial and legal consultants, etc. The highest level of decision makers or policy makers perform quinary activities.


Value added, national accounts and the three sector model

The 3 sector model was closely related to the development of
national accounts National accounts or national account systems (NAS) are the implementation of complete and consistent accounting technique Technique or techniques may refer to: Music * The Techniques, a Jamaican rocksteady vocal group of the 1960s *Technique ...
, notably by Colin Clark. The concept of
value added In business, total value added is calculated by tabulating the unit value added (measured by summing unit profit Profit may refer to: Business and law * Profit (accounting) Profit, in accounting Accounting or Accountancy is the meas ...
is central to national accounting. Value added in the secondary sector of the economy (manufacturing) is equal to the difference between the (wholesale) value of goods produced and the cost of raw materials supplied by the primary sector. Similarly, the value added by the tertiary sector is equal to the difference between the retail price paid by consumers and the wholesale price paid to manufacturers. The concept of value added is less useful in relation to the quaternary and quinary sectors.


See also

*
Colin Clark (economist) Colin Grant Clark (2 November 1905 – 4 September 1989) was a British and Australian economist and statistician who worked in both the United Kingdom and Australia. He pioneered the use of gross national product (GNP) as the basis for studyin ...

Colin Clark (economist)
*
Jean Fourastié Jean Fourastié (; 15 April 1907 in Saint-Benin-d'Azy, Nièvre - 25 July 1990 in Douelle, Lot (department), Lot) was a France, French economist, notable for having coined the expression ''Trente Glorieuses'' ("the glorious thirty
ears The ear is the organ Organ may refer to: Biology * Organ (anatomy) An organ is a group of Tissue (biology), tissues with similar functions. Plant life and animal life rely on many organs that co-exist in organ systems. A given organ ...
) to descr ...
*
Primary sector of the economy The primary sector of the economy includes any industry Industry may refer to: Economics * Industry (economics) In macroeconomics, an industry is a branch of an economy that produces a closely related set of raw materials, goods, or s ...
*
Secondary sector of the economy In macroeconomics Macroeconomics (from the Greek prefix ''makro-'' meaning "large" + ''economics'') is a branch of economics Economics () is a social science Social science is the branch A branch ( or , ) or tree bran ...
*
Tertiary sector of the economy The tertiary sector of the economy, generally known as the service sector, is the third of the three economic sector Image:Economic sectors and income.JPG, 250px, Percentages of a country's economy made up by different sectors. Countries with h ...
*
Quaternary sector of the economyThe quaternary sector of the economy is based upon the economic activity that is associated with either the intellectual or knowledge-based economy . This consists of information technology; media; research and development; information-based serv ...
*
Information Revolution The term information revolution describes current economic An economy (; ) is an area of the production Production may be: Economics and business * Production (economics) * Production, the act of manufacturing goods * Production, in the out ...
*
De-industrialization The former decline_of_the_city's_once_vibrant_Automotive_industry_in_the_United_States.html" "title="Decline_of_Detroit.html" ;"title="Detroit.html" ;"title="Packard Automotive Plant in Detroit">Packard Automotive Plant in Detroit is one of the ...
*
Private sector The private sector is the part of the economy An economy (; ) is an area of the production Production may be: Economics and business * Production (economics) * Production, the act of manufacturing goods * Production, in the outline of indust ...


References


Further reading

* Bernhard Schäfers: ''Sozialstruktur und sozialer Wandel in Deutschland.'' ("Social Structure and Social Change in Germany") Lucius und Lucius, Stuttgart 7th edition 2002 * Clark, Colin (1940) ''Conditions of Economic Progress'' * Fisher, Allan GB. ''Production, primary, secondary and tertiary.'' Economic Record 15.1 (1939): 24-38 * Rainer Geißler: ''Entwicklung zur Dienstleistungsgesellschaft''. In: ''Informationen zur politischen Bildung''. Nr. 269: ''Sozialer Wandel in Deutschland'', 2000, p. 19f. * Hans Joachim Pohl: ''Kritik der Drei-Sektoren-Theorie.'' ("Criticism of the Three Sector Theory") In: ''Mitteilungen aus der Arbeitsmarkt- und Berufsforschung.'' Issue 4/Year 03/1970, p. 313-325 * Stefan Nährlich: ''Dritter Sektor: "Organisationen zwischen Markt und Staat."'' ("Third Sector: Organizations Between Market and State"). From ''"Theorie der Bürgergesellschaft" des Rundbriefes Aktive Bürgerschaft'' ("Theory of the Civil Society" of the newsletter "Active Civil Society") 4/2003 * Uwe Staroske: ''Die Drei-Sektoren-Hypothese: Darstellung und kritische Würdigung aus heutiger Sicht'' ("The Three-Sector-Hypothesis: Presentation and Critical Appraisal from a Contemporary View"). Roderer Verlag, Regensburg 1995 {{Authority control Economic theories Economic sectors