As economies develop, their three main sectors – agriculture, manufacturing and services – tend to follow specific patterns:
- The agriculture sector shrinks
- The manufacturing sector grows initially, and then begins to decline in favour of the services sector
- The services sector grows
In particular, a study of trends in 24 countries over the period 2000-14 by economists Ana Maria Santacreu and Heting Zhu came up with the following results
% CONTRIBUTION OF EACH SECTOR
Agriculture Manufacturing Services
Share employment 2 17 81
Share value added 5 17 78
Share exports 7 92 1
Share R&D spending 1 65 34
Productivity growth 33 42 25
Whilst the first broad observations ring true about the courses each sector will take as an economy develops, the above specific figures, interesting though they may be, raise more questions than they answer – for example:
- Which 24 countries were sampled?
- What was the size of each economy?
- What was the mix of undeveloped, emerging and developed economies?
And the productivity growth claims offer further proof that productivity measurement at the national level is not only flawed but misleading
However, we do know that, as nations climb the skills/ economic development ladder, they tend to offload their basic industries – i.e. those needing more hands than heads such as the manufacture of steel, shoes or clothes – such sectors often clock well as high-productivity sectors
But many of the service sectors which replace them have relatively low productivity levels – and are lower paid
So inevitably, as nations develop along this path, their apparent productivity and average wage levels stall