Question

What is the Petty-Clark theorem? What is the evolution law of Three-Industry model?
Subject Name:international service trade

Answer 1

The Petty-Clark Theorem describes the change in the industrial structure of a nation through the process of economic development. First the economy is in the primary sector (with agriculture, extraction of raw materials as the main productive activity), then shifts to the secondary sector (manufacturing) and finally to the tertiary sector (services). Similarly, the Three-Industry model divides the economy into three different sectors of activity - primary, secondary and tertiary. Economic structural (in terms of output or employment) shifts from primary industry to secondary is likely to take the economy out of the poverty trap and reaches the middle income stage. Afterwards, in order to escape from middle income trap, the economic structure should shift from the secondary industry towards tertiary industry. This describes the evolution of the economy through the Three-Industry model.