Abstract
The global economy is divided into the familiar 5% agriculture, 25% manufacturing, and 70% services. The highest agricultural share is in the tropics, with a lower share in wealthier countries. The wealth of nations can be predicted by a low farm sector share.
Manufacturing and services have reversed their relation to wealth. Major advances in technology have made services tradable, and now a higher share in services characterizes advanced economies.
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Notes
See UN list of Least Developed Countries at http://www.unohrlls.org/en/ldc /(Accessed February 12, 2013). Also see Appendix A.
The correlation is very low at–0.014.
S. Kuznets, “Quantitative Aspects of the Economic growth of Nations,” Economic Development and Cultural Change, Vol. 5, No. 4, July 1957, p. 16; University of Chicago Press.
The structure of this argument is from S. Kuznets, op. cit. The limit in the size of the services sector is a result of its non-tradability. If services are largely non-tradable, then they cannot generate export earnings. In order for the services sector to grow to 100% of the economy, food and goods must be imported. But, such imports must be purchased from the proceeds of exports, and if the economy produces only services, then there are no goods to export. So, there is some natural upper limit to the share of services in GDP.
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© 2013 Joe Atikian
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Atikian, J. (2013). The Global Status Quo. In: Industrial Shift: The Structure of the New World Economy. Palgrave Pivot, New York. https://doi.org/10.1057/9781137340313_3
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DOI: https://doi.org/10.1057/9781137340313_3
Publisher Name: Palgrave Pivot, New York
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