Three-sector Hypothesis

The three-sector hypothesis is an economic hypothesis which divides economies into three sectors of activity: extraction of raw materials (primary), manufacturing (secondary), and services (tertiary). It was developed by Colin Clark and Jean Fourastié.

According to the hypothesis, the main focus of an economy's activity shifts from the primary, through the secondary and finally to the tertiary sector. Fourastié saw the process as essentially positive, and in The Great Hope of the Twentieth Century he writes of the increase in quality of life, social security, blossoming of education and culture, higher level of qualifications, humanisation of work, and avoidance of unemployment.

Countries with a low per capita income are in an early state of development; the main part of their national income is achieved through production in the primary sector. Countries in a more advanced state of development, with a medium national income, generate their income mostly in the secondary sector. In highly developed countries with a high income, the tertiary sector dominates the total output of the economy, according to the hypothesis.

Read more about Three-sector Hypothesis:  Structural Transformation According To Fourastié, See Also

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