TOPIC: Economic Transformation, Multi-Sector Economy, Barriers to

Transformation, Economic Development

Reporter: REYNAVI M. OLIVARES

Economic Transformation
 Also called structural transformation or structural change
 This refers to the continuous process of moving labor and other resources from lower-
to higher-productivity sectors (structural change or structural transformation); and
raising within-sector productivity growth.
 Structural transformation refers to the reallocation of economic activity across the
broad sectors agriculture, manufacturing and services.
The Sectors of the Economy
The Three Sector Model
 According to the three-sector theory, all economic activity can be classified into one of
three sectors: the primary sector, the secondary sector, and the tertiary sector.
 Three Sector Theory is an Economic theory presented by, Allan Fisher Jean Fourstale
Colin Clark

1. Primary Sector - The primary sector describes all industries that are engaged in the
extraction of natural resources or the production of raw materials. This includes
industries such as forestry, mining, agriculture, or fishing.
 2. Secondary Sector - This sector includes the industrial Construction and
Manufacturing of a certain material, previously extracted from the raw-material.
3. Tertiary Sector - The tertiary sector describes all industries that provide services to
other businesses or final consumers. It is sometimes also referred to as the service
sector or service industries. Examples of tertiary sector industries include retail, health
care, financial services, entertainment, and many others.

Additional Sectors
4. Quaternary Sector - The quaternary sector includes all industries that are concerned
with the creation and distribution of knowledge. This sector has emerged a few years
ago as a further distinction of the tertiary sector. Many economists argue that
knowledge-based industries are distinct enough from classical service industries to
warrant a separate sector.
5. Quinary Sector - The quinary sector is the part of the economy where the top-level
decisions are made. This includes the government which passes legislation. It also
comprises the top decision-makers in industry, and commerce.
Barriers to Transformation

• Poor infrastructure
• Human capital inadequacies
• Primary product dependency
• Declining terms of trade
• Savings gap; inadequate capital accumulation
• Foreign currency gap and capital flight
• Corruption, poor governance, impact of civil war
• Population issues

Breaking Down the Key Economic Development Stages

1. Structural Transformation
 change in the composition of GDP
 economic activities and jobs are initially based in the agricultural sector and shifts
to the secondary and/or tertiary sector
2. Demographic Transition
 Changes in fertility rates
 Increase in life expectancy
 3. Urbanization
 migration of people from rural areas seeking jobs in the emerging urban centers
 the transformation of originally semi-urban suburbs into fully urban centers
 differences in population dynamics between rural and urban areas.
Takeaway :
Economic Transformation characterized by:
• Decline in agriculture as technology improves
• Growth in construction & manufacturing. People move to non rural areas to live
• Growth in service sector to support the growth in manufacturing & construction
• Globalisation of services facilitated by developments in ICT

References:
Economic sector. (n.d.) Retrieved from
https://energyeducation.ca/encyclopedia/Economic_sector
Pettinger, Tejvan.(2019). Sectors of the economy. Retrieved from
https://www.economicshelp.org/blog/12436/concepts/sectors-economy/
UN Habitat. (n.d.) Structural transformation in developing countries: Cross regional analysis.
Retrieved from https://unhabitat.org/sites/default/files/download-manager-
files/Structural%20Transformation%20in%20Developing%20Countries-FINAL.pdf