NOTRE DAME OF MIDSAYAP COLLEGE

MIDSAYAP, NORTH COTABATO

Name: Camille George R. Olarte Date: February 3, 2022

Course & Year: BSA – 1

Explain the 3 stages of Economic Growth by Colin Clark

Three Stages of Economic Growth by Colin Clark

Stage 1 – Agriculture is the main source of employment and income.

According to Colin Clark’s theory, agriculture is the primary stage of economic growth
as it involves the production and extraction of raw materials. This one major sector of economy
plays a significant role in economic growth and development. As the provider of food it is a
cornerstone of human existence. As a furnisher of industrial raw materials it is an important
contributor to economic activity in other sectors of the economy. In fact, agriculture is the
leading source of employment and income, particularly in low-income and developing
countries. According to International Labor Office in 2019, over a billion people, nearly a third
of the world’s workforce, are employed in the agricultural sector. In many developing countries
the percentage is much higher, particularly in East and Southeast Asia, South Asia and Sub-
Saharan Africa. Given the importance of agriculture as a source of employment and income in
many low-income and developing countries, achieving decent work in agriculture is key to
reducing poverty, stimulating economic growth, and improving food security in rural areas.

Reference:
International Labor Office. (2019). Decent and Productive Work in Agriculture.
https://www.ilo.org/wcmsp5/groups/public/---ed_dialogue/---
sector/documents/publication/wcms_437173.pdf

Stage 2 - Manufacturing industry becomes the major economic activity as a country develops.

Manufacturing industry is the secondary stage which generally takes the output of
agricultural industry like raw materials and creates finished goods suitable for sale to
domestic businesses or consumers and for export. Manufacturing sector is the driver of
productivity growth. This, in turn, is the lifeblood of technological development. The said sector
offers special opportunities for capital accumulation which is one of the aggregate sources of
growth (Attiah, 2019). A study by Haraguchi (2017) revealed that almost no country has
achieved and sustained a high standard of living without making significant developments in its
manufacturing sector, except for a few oil rich countries and small financial havens. Clearly,
manufacturing industry becomes the major economic activity as a country develops because
developing countries which now have higher per capita incomes have seen the share of
manufacturing activity in their GDP and employment rate increase.

Reference:
Attiah, E. (2019, February 22). The Role of Manufacturing and Service Sectors in Economic
Growth: An Empirical Study of Developing Countries.
https://www.ersj.eu/journal/1411/download

Haraguchi, N (2017, May). The Importance of Manufacturing in Economic Development: Has

This Changed?. https://doi.org/10.1016/j.worlddev.2016.12.013.

Stage 3 - Service industries grow to be the dominant feature of the economy as a country
further develops.

This is the last stage of Colin Clark’s three stages of Economic Growth. The service
sector consists of the production of services instead of end products. Services also known as
intangible goods include attention, advice, access, experience, and affective labor. This grows to
be the dominant feature of the economy as a country further develops due to the increasing
importance and share of the service sector in the economies of most developed and developing
countries. In fact, all developed countries are in the process of becoming service economies as
the share of service industries in economic activities and employment continues to grow.
According to Sultan (2008), countries which have higher per capita income, contain larger share
of service sector and which have low per capita income contain smaller share of service sector in
the economy. Indeed, service industry ceaselessly becomes a dominant feature of the economy of
a country that further develops or can be considered developed as stated by Colin Clark.

Reference:
Sultan, M. (2008, August 11). The Tertiary Sector Is Going to Dominate the World Economy;
Should We Worry?. https://mpra.ub.uni-muenchen.de/14681/1/MPRA_paper_14681.pdf