What is an Economic Structure?
The phrase “economic structure” refers to the shifting balance of output, trade, earnings, and employment across several economic sectors, ranging from primary (farming, fishing, mining, etc.) through secondary (manufacturing and construction industries) to tertiary and quaternary sectors (tourism, banking, software industries). Changes in an economic structure are an inevitable part of existence, but they pose obstacles in reallocating production factors.
The factors of production, such as land, capital, labour, and physical resources, are regulated by economic systems. An economic system comprises a variety of organisations, agencies, companies, decision-making processes, and consumption patterns that make up a community’s economic structure.
Example of the Economic Structure:
There are four types of economic structures:
- Traditional Economic System: The traditional economic system is founded on exchanging goods, services, and labour, following well-established patterns. It is heavily reliant on individuals, with little division of labour or specialisation. The traditional economy is, in essence, the most fundamental and oldest of the four types.
- Command Economic Structure: In a command system, a powerful centralised authority – usually the government – is in charge of a large section of the economy. The command economic system, often known as a planned system, is widespread in communist regimes since the government makes production decisions.
- Market Economic System: The principle of free markets underpins market economic systems. To put it another way, the government plays a minor role. The government has little control over resources and avoids interfering with vital economic sectors. Rather, people and the supply-demand connection are the sources of regulation.
- Mixed System: The characteristics of the market and command economic systems are combined in mixed systems. As a result, mixed systems are often referred to as dual systems. The word is also used to characterise a market system that is heavily regulated.
Why are Economic Structures important?
Economic structures influence structural learning, institutional performance, income distribution, and the direction of political transitions, all of which influence economic performance.