The world is constantly changing. New technologies are being created, new social trends are emerging and new political movements are also emerging. For example, the «Fridays for Future» movement, which is demonstrating for more climate protection and also for the rapid phase-out of coal. The phase-out of coal is also an issue of structural change. But more about that here in the explanation!
Structural Change – Definition
Structural change is usually viewed in an economic sense. In the economic sense, structural change describes either
- the change in the economic structure of industries, the intersectoral structural change,
- the change in the economic structure of regions, the regional structural change or
- the change in the economic structure of the employment relationships and income bracket, the gainful or employment structural change.
These terms are explained in more detail below in the explanation.
Structural change is the result of long-term changing relationships between individuals economic sectors one National economy, also called relations of an economy. The economic sectors can be thought of as branches that national product contribute to the country. It is also said about it sectoral structure or production structure.
That national product of a country expresses the totality of all goods produced in an economy within a given period of time in terms of a numerical monetary value.
The changes are linked to the dynamics of the market economy. The economy is constantly changing, one speaks of structural change when something changes fundamentally and permanently. The structural change is new technologies and the international competition influenced.
Structural change – basic concepts
Some important basic terms for understanding structural change are explained below.
Economic structural change – economic sectors
The economic sectors of an economy are divided into Primary Sector, Secondary Sector, tertiary sector and Quaternary Sector. Of the primary sector is that part of the economy that deals with the extraction of raw materials employed. Examples of branches in the primary sector are agriculture, forestry or fisheries.
Under the Secondary Sector of the national economy are seized sectors, they deal with Raw material processing and processing occupy. Examples of this are the energy and water supply and construction sectors.
Of the tertiary sector the national economy encompasses the whole service sector. This includes, for example, trade and personal service.
Of the Quaternary Sector includes higher quality services from specialistssuch as the research industry, development, banks or tax advice.
The figure shows four pie charts showing the proportions of different Industry sectors in the overall economy in 1960, 1990, 2000 and 2015. In the year 1960 took that manufacturing industrywhich belongs to the secondary sector, more than 50 percent of the overall economy while public and private service providers and Financing, leasing and corporate service providersi.e. the tertiary sector, only under 25 percent share in the overall economy.
In the year 2015 the breakdown of the industry shares looks significantly different. The tertiary sector, i.e. public and private service providers, financing, rental and corporate service providers, is increasing more than the half of the economy as a whole. The secondary sector is still quite strong, but compared to 1960 dropped sharply to just about 30 percent share of the overall economy.
Sectoral structural change
The economic sectors explained above are important to sectoral structural change to understand. The sectoral structural change describes the Shift in importance between economic sectors. For example, 70 years ago the primary sector, mainly agriculture, was still the most important sector in the national economy. Then the technology evolved, it came to industrial Revolution and the importance of the primary sector has shifted towards the secondary sector. This is an example of sectoral structural change.
Figure 2: The distribution of employed persons across economic sectors
The figure shows the shift in economic sectors at first glance. While the number of people employed in the primary sector has continued to fall, the number of people employed in the tertiary and quaternary sectors (combined in the figure) has been increasing sharply since around 1985. The number of employees in the secondary sector has remained relatively constant since 1970.
The sectoral structural change from the primary sector to the secondary sector and to the tertiary or quaternary sector has been since 19th century observable in all economies. Society has changed from an agrarian society, to an industrial society and finally to an information society. You can find more information about the company terms in one of the following sub-chapters.
The structural change is due to industrialization and mechanization to explain in the 19th century. Farming became more efficient, a single farmer managed to feed more people and thus the need for farmers decreased while the need for labor increased in the new factories. in the 20th century then followed by technological advances automations and robotswho took over the work of the factory workers. The tertiary and quaternary sectors increased in importance, while the secondary sector decreased in importance.
Industrialization describes the spread of the industrial sector. This means that factories and machines are becoming increasingly important and new inventions are making work processes faster and easier. You can read exactly what «industrialization» is in the accompanying explanation.
Intrasectoral structural change
There is also the intrasectoral structural change in which the Shifts in the importance of industries within an economic sector.
An example of this would be the shift from cars with internal combustion engines to cars powered by electric motors. The branches of car production of cars with internal combustion engines and cars with electric motors both belong to the secondary economic sector. While the industry of cars with combustion engines is becoming less and less important, the importance of the electric car industry is increasing.
Regional structural change
Finally, there is the regional structural change. This part of the structural change describes the Change of structures within a region.
A good example of regional structural change is the Ruhr area. A lake with a surrounding residential and local recreation area was created from the former Phoenix Ost steel works in Dortmund.
Structural change – concepts of society
Society is also affected by structural change and so there are separate names for societies in which certain goods are particularly important. In the agrarian society are the most important goods labor and land.
In the industrial society are effective goods and efficient machines significant. In the information society are the most important goods after all knowledge and information. These most significant goods indicate the relevant economic sectors in the different types of societies.
Structural Change – Agriculture
Agriculture is particularly affected by structural change. Above all, the number of companies, their land areas and their efficiency have changed in recent decades. Finally, he is also playing climate change a role for agriculture, some farms are therefore converting their production to more ecological forms of agriculture.
In the figure you can see that 1960 about 1.5 million farms were registered 2019 the number of farms is only approx 266,000. DZ Bank expects the number of farms to increase by 2040 to about 100,000 throughout Germany could decrease. At the same time, the land area of a farm has increased from an average 8.7 hectares in the year 1960 to about 62 hectares in the year 2019 enlarged. It is also noticeable that small family businesses are increasingly giving way to large companies, so that currently approx 40 percent of the total agricultural area on only five percent of the largest companies are omitted.
Causes of structural change in agriculture
The reasons for this change in agriculture are also due to technical progress. Machines such as modern tractors, sowing, plowing and harvesting machines for field work and automatic milking machines or feeding machines for taking care of the cattle replace hard physical field work at least in part and also make it significantly more efficient. This is evident, for example, from the quadrupling of wheat yields in the last 120 years.
But these machines are also among the clear more expensive production goodsthat have arisen as a result of technological advances. As a result, the companies get into an economic pressure situation, which they Specialization of animal and plant species and a expansion of their business solve.
Figure 6: Change in the efficiency of a farmer and the number of farms and employees in Germany
The main benefit of specializing in one animal or plant species is that farms only have to buy expensive agricultural machinery specifically for their animal or plant species. In addition, a specialization also brings experience and thus a Quality and yield increase. A larger plant can bring in more yields, high yields are one of them low profit margins of agricultural products has increased significantly in importance.
Change in the employment structure in agriculture
The primary sector, and particularly agriculture, have fallen extremely in importance for the national economy in recent decades. Today are only about 1.3 percent of all employees in agriculture. Finding a successor to manage a small or medium-sized farm is also becoming increasingly difficult.
In addition, many current farm managers are older than 55 years. the obsolescence of this profession and the Difficulty finding a successor will presumably lead to the fact that when the farm managers reach retirement age, a «farm deaths» is triggered by small and medium-sized farms in Germany.
Contribution of climate change to structural change in agriculture
In addition, climate change is having a major impact on agriculture. Due to the specialization of many farms, fields are only planted on one side. This one-sided planting however, is very susceptible to weather extremes. Due to the fact that extreme weather events due to climate change are becoming more frequent loss of earnings from farmers. Alternative sources of income are therefore becoming more important and many farms are already relying on a second…