Three-sector hypothesis

The Three-sector hypothesis is a large-scale economic type theory. It says that there are three kinds of economic activities, which are very different from each other:

1. The extraction of raw materials
2. Manufacturing goods
3. Providing services

These kinds of activities are called economic sectors. The theory speaks about the primary, secondary, and tertiary sector. The theory was developed by Alan Fisher,^[1] Colin Clark^[2] and Jean Fourastié^[3] in the 1930s. Clark used a speech given by Sir William Petty, in 1690.^[4] For this reason the theory is also known as Petty's Law.^[5] The first sector is about directly using natural resources, the second sector is about processing these resources to obtain "higher level" goods.

The theory also says that the main focus of the economy of a country will change, from the primary to the secondary, and from the secondary to the tertiary sector, as economic development progresses.