Sector, Sectors

By: EconomyWatch   Date: 29 June 2010

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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:

Primary sector:

  • Comprises production and extraction of raw materials.

  • Examples include agriculture (commercial and sustenance) and animal rearing/husbandry.

  • Other activities include quarrying, mining and processing and packaging of raw materials.

    • 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.

    Secondary sector:

    • 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.

    Tertiary sector:

    • 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:

    Public sector:

    • 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.

    Private sector:

    • 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.

    Voluntary 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:

    • culture

    • government

    • 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.

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