Sector, Sectors

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.