7 junio, 2024

Economic structure: characteristics, elements and examples

The economic structure It is the overall underlying framework, including communications systems, industrial facilities, education, and technology, that enables a country or region to produce goods, services, and other resources with exchange value.

This structure describes the changing balance of production, trade, income and employment. The values ​​are obtained from the different economic sectors of the country, ranging from the primary (agriculture, mining, etc.), the secondary (manufacturing and construction industries), to the tertiary sector (tourism, banking).

A country has a high-profit production structure if it produces high-value-added goods that are technically sophisticated. By contrast, a low-profit economic structure is made up of technologically simple products with low added value.

Fundamentally, economic activities reflect the productive capacity of an economy and the economic structure of a country is the representation of its technological capacity.

[toc]

Changes in the economic structure

The economic structure of a country is the fundamental cause of economic performance. Therefore, differences in economic structure across time and space can explain differences in economic development.

Changes in the economic structure are a natural feature of economic life, but they present challenges for the reallocation of factors of production. For example, a change in the production and employment of some sector can generate problems of structural unemployment.

Characteristics

Sectors

Within an economic structure are the different sectors that make up the economy of a country:

Primary sector

This sector contains all the activities in which their production capacity is obtained directly from nature, such as agriculture, fishing, mining and forestry.

Secondary sector

This sector has the capacity to congregate all the activities that carry out the elaboration and transformation of goods from nature through industry and construction.

Third sector

This sector deals with different products for personal, domestic, state, commercial, financial and professional services.

Dimensions

The economic structure is the conjunction in an orderly manner of the different economic components of a region. These variables focus on population and infrastructure.

In order to reach the appropriate conclusions, an analysis of the economic reality of a country is carried out in order to work on that reality, putting them into practice.

Elements of the economic structure

Distribution Policy

Through the structure of the economy, it is defined how income is going to be distributed, providing a platform for political powers. This power is managed to reproduce this distribution with the help of organisms that strengthen production.

Forming an opinion on this and many other political questions requires some knowledge of the economic structure.

Growth rate

The percentage of economic growth of the country is delimited by the structure of the economy. Through this process is that institutions and economic structures are represented.

Reserve Bank and government

The two institutions that have the greatest effect on the economy are the Reserve Bank and the government.

The Reserve Bank has the greatest influence on economic activity. By raising or lowering interest rates, the Reserve Bank can control economic activity.

The government sets the agenda for medium- and long-term economic growth by establishing the necessary economic institutions and frameworks.

The director of the Reserve Bank will influence the performance of the economy in the context of the economic structure, but the government has the ability to alter that structure.

Economic structure of Mexico

Its economic structure depends mainly on exports to the US, which receives 85% of Mexico’s sales abroad.

Carrying out an analysis by activity of the period 2006-2015, it is discovered that the manufacturing activity is the one that has the highest participation in GDP, with 16.6%. On the other hand, commerce activity constitutes a participation of 14.8%, followed by real estate services with 11.9%.

In this period, it can be observed that the manufacturing industry shows a 3.2% reduction in participation in the GDP contribution, while trade shows an increase of 6.9%.

In general, the tertiary sector makes the greatest contribution to GDP with 62%, followed by the secondary sector with 35% and the primary sector with 3%.

The largest participation in the tertiary sector is held by Mexico City with 24%, then the state of Mexico with 10%, Jalisco and Nuevo León with 7% each.

In the secondary sector, Campeche with 13% occupies the first position of participation in GDP, followed by Tabasco and Nuevo León with 8% each. In the primary sector, Jalisco has the largest participation, with 11%.

Economic structure of Venezuela

In the last four years, the Venezuelan economy has had a cumulative drop of 40% of GDP, with a framework of scarcity that affects not only companies due to the lack of imported raw materials, but the entire population.

The Central Bank has no operational international reserves left, in a scenario where the reduced oil revenues are no longer enough to cover the external financial debt burden.

The cement, steel and mining industries are practically paralyzed. Telecommunications and electricity service companies are bankrupt due to the lack of investment and the formidable delay in adjusting rates.

Most of the nationalized companies in the agro-industrial sector are currently closed and others operate at a minimum.

In agricultural production, the dismal results are explained by the scarcity of inputs at subsidized prices, controls, low investments due to uncertainty and legal uncertainty due to private property rights.

The deficient management of oil revenues led to a serious situation of shortage of foreign currency and a scenario where it is impossible to simultaneously meet the external debt and the necessary imports.

Economic structure of Colombia

The increase in Colombia’s per capita income expresses that the economy is expanding. With a higher income, the economy demands more elaborate products, with a higher added value.

For this reason, the economic structure has been transforming, because it is not agriculture but industry that can provide these products.

In the Colombian economic structure, agriculture contributes only 7% of the GDP, despite the fact that 70 years ago it participated with 40%. Industry has 13%, but at the end of the 1970s it constituted 23% of GDP.

Comparison of the Colombian pattern with that of countries with similar incomes reveals that agriculture maintains the downward pattern existing in those nations. On the other hand, starting in 1990 the decline of the manufacturing industry in the share of GDP accelerated.

The services sector shows a pattern in which its participation in GDP has increased, consistent with what was observed in the surveyed countries. In Colombia they make up 63% of GDP, also generating almost half of employment.

Services are currently more important in terms of their contribution to GDP than industry, agriculture and agribusiness.

Economic structure of Spain

The structure presented by the Spanish economy corresponds to that of a developed nation, with the service sector contributing the most to the Gross Domestic Product, followed by industry.

These two sectors constitute 91% of GDP. The contribution of agriculture has been significantly reduced as a result of economic development, currently representing only 2.9% of total GDP.

The Spanish economy throughout 2018 remained on the growth path, which began in the last half of 2013.

The GDP grew in the fourth quarter of 2018 at a rate of 0.7%, being the only one that accelerated its pace with respect to the previous quarter of the main economies of the euro zone. Thus, the interannual growth of the GDP has been placed at 2.4%.

On the other hand, since the end of the 1980s inflation in this country has been coming down slowly. Until 1992, average inflation was 5.8%, falling from 5% in 1993, and thus it has gradually been declining.

As of December 2018, the year-on-year inflation rate was 1.2%, mainly due to fuel prices.

Example

Imagine a bathtub full of water, where the water level represents the level of employment or economic activity. In the bathtub there are two outlets: taxes and savings.

The government collects taxes to later use them to finance various activities, such as education, health, justice, etc.

Companies invest their savings through bank deposits. The bank then lends them out to other companies to invest, putting them back into the economy.

If the economy falls below the full employment level, there will be unemployment. If it rises above that level there will be inflation. Both are undesirable, you don’t want massive unemployment or high inflation.

The amount of taxes and savings returned to the economy depends on two key agents: the government and the Reserve Bank. By respectively controlling fiscal and monetary policy, they control the “taps” that refill the bathtub.

The government decides how much to tax and how much to spend. On the savings and investment side, the Reserve Bank’s instrument is the interest rate.

The government and the Reserve Bank cannot simultaneously reduce inflation and increase employment, because they need to strike a balance between the two.

References

New Zealand Institute of Economic Research (2020). Structure of the economy. Taken from: nzier.org.nz.
Gemet (2020). Economic structure. Taken from: eionet.europa.eu.
Josefina Pacheco (2019). Economic Structure (World Economic Structure). Web and Companies. Taken from: webyempresas.com.
Constantine Collin (2017). Economic structures, institutions and economic performance. Journal of Economic Structures. Taken from: journalofeconomicstructures.springeropen.com.
Journal of Economics Autonomous University of Yucatan (2017). Mexican Economic Structure: Key, Strategic, Driving and Independent Sectors. Taken from: revista.economia.uady.mx.
New Society (2018). How to explain the Venezuelan economic catastrophe? Taken from: nuso.org.
Enrique Lopez Enciso. The structure of the economy. The Colombian. Taken from: elcolombiano.com.
Guide to Business in Spain (2019). Economic structure. Taken from: guidetobusinessinspain.com.

Deja una respuesta

Tu dirección de correo electrónico no será publicada. Los campos obligatorios están marcados con *