A sector usually refers to a specific subdivision in an economy. An economic sector can be further classified into sub-sectors. The definition of a sector is based on various parameters such as production stage, product type and ownership.
Sector: Types and Economic Functions Based on Production Stage
Economic sectors are classified on the basis of different phases of the production chain. The major sectors are:
- This sector supplies raw materials to industries of other sectors.
- Known as a country’s primary sector because it establishes a solid foundation for the entire economy.
- Plays a vital role in developing and under-developed nations.
- It includes all activities related to conversion of raw materials into finished products.
- Activities include metal working, automobile production, chemical industries, textile production, energy utilities, aerospace manufacturing, shipbuilding and construction.
- Generates large scale employment for both white collar and blue collar workers.
- Involves production of services or intangible goods.
- Activities include transportation, advertising and banking.
- Examples include doctors, accountants and other professionals who offer their services.
- In most developed and developing nations, this sector features the highest level of economic activity.
- In the U.S., for example, over 80% of total labor force is involved in the tertiary sector.
Based on product type, the activities of different sectors are clubbed into industry sector and service sector.
Sector: Types and Economic Functions Based on Ownership
The economy can be classified on the basis of ownership:
- It includes all those economic activities that are owned and managed by government agencies.
- Major activities are social security services, managing national defenses and administering public transportations.
- Involves economic activities that are managed by private institutions.
- Profit making is its sole purpose. However, some exceptions are possible and functional in the sector.
- Known as the third sector or the civic sector.
- It includes those social activities that are undertaken by non- governmental and non- profit organizations.
- Includes various political parties, volunteer communities and religious and charitable organizations.
Another economic sector is the quaternary sector. It covers various intellectual activities in an economy related to:
- scientific research
- Information technology
The behavior and economic importance of different sectors vary from one another. A particular sector may be more dominant in a nation than others. The contribution of primary and public sectors is more evident in under-developed economies than developed nations.