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The Tertiary Sector: Its Place in the Economy

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Every economy has various levels of economic activities, known as sectors. These sectors play a significant role in analyzing the economy as a whole and its individual parts. By categorizing activities into sectors, it’s possible to see where an economy is in terms of its growth process. It indicates which areas are expanding and which may be experiencing contraction. This data helps economists make better decisions about economic policy.

Especially in emerging economies, the sectoral composition of GDP is an essential indicator of development and growth prospects. In a well-developed economy, there is diversity across sectors, each making its valuable contribution. A good mix of these activities provides stability and resilience, as different sectors can offset fluctuations in others. 

What are the 3 Main Sectors of the Economy?

The three main sectors of the economy are the primary sector, the secondary sector, and the tertiary sector. These three work hand-in-hand to produce goods and services that fuel people’s everyday lives.

Like a food chain, each sector relies on the previous one for inputs. Without one sector, the others couldn’t function. Each sector has a different purpose; together, they comprise what is known as a country’s economic base.

Starting from the simplest form of economic activity is the primary sector. This stage involves the collection and production of raw materials. Also known as the extraction sector, it includes direct interaction with natural resources like farming, fishing, forestry and mining. The primary sector is considered the most important as it provides the inputs for the secondary and tertiary stages.

After these raw materials are collected, they get sent to the secondary sector. This part is where they turn into finished goods. This stage is also known as manufacturing or construction. The final products created in this sector are then ready to reach the end-users. It is where the tertiary sector comes in.

What is Tertiary Sector?

The tertiary sector is the final stage of economic activity. It’s where goods and services get to reach a tertiary consumer. It solely focuses on providing the intangible aspect of delivering services. That’s why it is also known as the service sector.

The tertiary sector is also where you can find most employment opportunities. It’s the biggest sector in developed economies and makes up a large part of their GDP. In recent decades, the tertiary sector has seen significant growth. According to the World Bank, services accounted for 55 percent of the world’s GDP, providing 45% of employment opportunities in 2019. The service industry has expanded due to globalization, technological advances, and higher disposable income.

How is Tertiary Sector Different from Others?

Unlike the primary and secondary sectors, the tertiary sector doesn’t create any new products. Instead, it facilitates the exchange of goods and services between businesses and consumers. Nonetheless, the activities taking place in the tertiary sector are crucial for developing the primary and secondary sectors. They act as an aid or support for the production process.

What Makes the Tertiary Sector?

The tertiary sector comprises a wide range of activities. However, they can be broadly categorized into two groups.

The first group comprises businesses that are in the venture of making money. It includes all the for-profit companies providing services such as finance, insurance, real estate, and transportation. These businesses exist to generate revenue and are driven by profit.

The second group of activities in the tertiary sector is the public sector. It’s where you can find all the government-run services like education, healthcare, and waste management. The main purpose of these organizations is not to earn revenue but to provide a service to the public. Although these organizations don’t make a profit, they play a vital role in society.

What is an Example of Tertiary Industry?

Many businesses are involved in the tertiary sector. Some of the most common examples include the following:

Banking and Financial Services

Finance management for business owners and individuals can be a complex task. This part is where banks and other financial institutions come in to assist. They offer services like loans, investments, and insurance. These businesses exist to make a profit by providing these services.

However, there are also non-profit organizations that provide financial services. They exist to promote economic development and social welfare. These include organizations like the World Bank and the International Monetary Fund.

Tourism and Travel
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In 2019, the global tourism industry provided 334 million jobs worldwide. It is estimated to generate 10.6% of the total employment worldwide. Tourism is undoubtedly one of the most significant and most critical tertiary industries. Businesses involved in this field include airlines, hotels, and tour operators. They provide services that enable people to travel to different parts of the world.

Tourism businesses usually have one primary goal, and that is to make a profit. However, tourism can also be a powerful tool for economic development. It can help create a chain of businesses and generate employment. Thus, providing an opportunity to reduce poverty and promote sustainable development.


The transportation sector is another significant player in the tertiary industry. It includes businesses like airlines, railways, and shipping companies. They provide services that enable the movement of people and goods from one place to another.

The transportation sector is vital for both domestic and international trade. It ensures the smooth flow of goods and services across borders. This sector also supports other industries like tourism and manufacturing.


The education sector is one of the most crucial components of the tertiary industry. It includes all the organizations that provide avenues for people to develop new skills and knowledge. These include schools, colleges, and universities. The education sector’s primary purpose is to create a society’s human capital.

A well-educated workforce is essential for the economic development of any country. These people are ready to take on higher-skilled jobs and contribute to innovation. They can also help businesses to be more productive and efficient.


The healthcare sector is a crucial industry that provides services to maintain and improve people’s health. It includes hospitals, clinics, and pharmacies. The healthcare sector is vital for the well-being of any society.

This industry is also a significant contributor to the economy. In 2020, when the COVID-19 pandemic hit, the healthcare sector was one of the essential industries. It played a vital role in combating the pandemic and saving lives. Members of the healthcare sector are also on the frontlines in the fight against other diseases.

The above are just some of the examples of tertiary industries. There are many more, including information technology, media, and telecommunications. Although the tertiary sector is not as visible as the primary or secondary sectors, it is just as important. It plays a vital role in the economy and contributes to the welfare of society. They provide services that enable businesses to operate efficiently and people to live better lives.

Why is the Tertiary Sector Important?

The tertiary sector is vital to every economy as it facilitates trade and commerce. It’s where businesses generate revenue and provide employment. Aside from that, the tertiary sector is also responsible for delivering the globalization of public goods and services. With the tertiary sector, businesses can tap into global markets and expand their customer base. The sector also helps companies to become more efficient and productive.

The tertiary sector is also essential for income elasticity. This term refers to the ability of people to spend more when their incomes rise. The tertiary sector plays a significant role in this by providing services that are not essential but are desirable. These include activities like travel and leisure. When people’s incomes rise, they tend to spend more on these services. This helps to drive economic growth.

And as technology advances, the tertiary sector will become even more important. With the advent of the internet and mobile devices, businesses can reach a wider audience. The tertiary sector is well-positioned to take advantage of this and provide services that are in high demand.

What Future Awaits the Tertiary Sector?

Currently, the tertiary sector is one of the fastest-growing industries in the world. And it is expected to continue growing as more businesses move online and adopt new technologies. This sector is also becoming increasingly important as the world becomes more globalized.

Countries that provide efficient tertiary services will have a competitive advantage in the global market. They will be able to attract more businesses and investments. Ultimately, this will lead to economic growth and development. In a 2020 report, the World Bank ranked the United States, China and Japan as the world’s top three drivers of tertiary output. These countries have well-developed tertiary industries that contribute significantly to their economies.

The tertiary sector is a significant part of the economy and plays a vital role in the development of any country. It is responsible for providing services that enable businesses to operate efficiently and people to live better lives. This sector is also becoming increasingly important as the world becomes more globalized. Countries that provide efficient tertiary services will have a competitive advantage in the global market. They will be able to attract more businesses and investments. Ultimately, this will lead to economic growth and development.

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