ECONOMIC STRUCTURE: CHARACTERISTICS, ELEMENTS AND EXAMPLES - ECONOMY - 2024

The economic structure is the entire underlying general framework, where communication systems, industrial facilities, education and technology are included, which allows a country or region to produce goods, services and other resources with an 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 productive structure if it produces high-value-added goods that are technically sophisticated. In 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.

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 may 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 its production capacity is obtained directly from nature, such as agriculture, fishing, mining and forestry.

Secondary sector

This sector has the capacity to bring together 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 destined for personal, domestic, state, commercial, financial and professional services.

Dimensions

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

In order to achieve 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 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.

To form a judgment on this and many other political questions requires some knowledge of the economic structure.

Growth rate

The percentage of economic growth in the country is delimited by the structure of the economy. It is through this process that economic institutions and 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 frameworks and institutions.

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

Mexico City

Its economic structure depends mainly on the exports it makes to the United States, which receives 85% of Mexico's sales abroad.

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

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

In general, the tertiary sector makes the largest contribution to GDP with 62%, followed with 35% by the secondary sector 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, the one with the largest participation is Jalisco, with 11%.

Economic structure of Venezuela

In the last four years, the Venezuelan economy has had a cumulative fall 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 operating international reserves left, in a scenario where the reduced oil revenues are no longer enough to cover the burden of external financial debt.

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

Most of the state-owned companies in the agribusiness sector are currently closed and others operate at their bare minimum.

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

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

Economic structure of Colombia

The increase in per capita income in Colombia 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 transformed, because it is not agriculture but industry that can provide these products.

In the Colombian economic structure, agriculture contributes only 7% to GDP, despite the fact that 70 years ago it participated with 40%. Industry has 13%, but in the late 1970s it made up 23% of GDP.

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

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

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

Economic structure of Spain

The structure of the Spanish economy corresponds to that of a developed nation, with the services sector being the one that contributes the most to the Gross Domestic Product, followed by industry.

These two sectors constitute 91% of GDP. The contribution of agriculture has decreased notably 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 during 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 late 1980s, inflation in this country has been falling slowly. Until 1992, average inflation was 5.8%, falling from 5% in 1993, and thus it has been gradually decreasing.

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

Example

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

The government collects taxes and then uses them to finance various activities, such as education, health, justice, etc.

Companies invest their savings through bank deposits. The bank then lends them to other companies for investment, returning them to the economy.

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

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

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

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

References

1. New Zealand Institute of Economic Research (2020). Structure of the economy. Taken from: nzier.org.nz.
2. Gemet (2020). Economic structure. Taken from: eionet.europa.eu.
3. Josefina Pacheco (2019). Economic Structure (World Economic Structure). Web and Companies. Taken from: webyempresas.com.
4. Constantine Collin (2017). Economic structures, institutions and economic performance. Journal of Economic Structures. Taken from: journalofeconomicstructures.springeropen.com.
5. Journal of Economics Universidad Autónoma de Yucatán (2017). Mexican Economic Structure: Key, Strategic, Promoting and Independent Sectors. Taken from: revista.economia.uady.mx.
6. New Society (2018). How to explain the Venezuelan economic catastrophe? Taken from: nuso.org.
7. Enrique López Enciso. The structure of the economy. The Colombian. Taken from: elcolombiano.com.
8. Guide to Business in Spain (2019). Economic structure. Taken from: guidetobusinessinspain.com.