Tertiary Sector (Service Sector)

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Description of Tertiary Sector. Explanation.


Definition Tertiary Sector. Description.

The Tertiary Sector is one of the three main industrial categories of a developed economy, the others being the Secondary Industry (manufacturing), and the Primary Industry (extraction such as mining, agriculture and fishing).

People working in the tertiary sector use time to deploy Intangible Assets, collaboration assets, and process-engagement to create productivity (effectiveness), performance improvement potential (potential) and sustainability. The tertiary sector is the most common workplace.

Typically the output of this time is content (information), service, attention, advice, experiences, and/or discussion.

The service sector consists of the "soft" parts of the economy such as:

  • Insurance

  • Government

  • Tourism

  • Banking

  • Retail

  • Education

  • Social services

  • Consulting

  • Personal services

  • Business services

  • Franchising

  • Restaurants

  • News media

  • Leisure industry/hotels

  • Healthcare/hospitals

  • Waste disposal

  • Real estate

  • Public utilities.

Growth of the Service Sector

Eichengreen and Gupta (2011 distinguish two waves of service sector growth:

  1. First wave of Services: This wave occurs in countries with relatively low GDP per capita levels. The kind of services in these countries are primarily traditional: housecleaning, preparing meals, lodging are examples. As income rises the service sector grows, but this will be at a decelerating rate.
  2. Second wave of Services: After a country has passed a certain threshold level of GDP per capita and become middle income countries, a second wave of service sector growth occurs. This is caused by a rise in modern services such as technical, communication and advertising services. Modern services those that are receptive to applying innovations and new information technologies that is tradable across national borders.

The threshold that needs to be reached in order to arrive at the second wave has decreased since the 1990s: the second wave of service-sector growth appears at lower and lower levels. That suggests other factors to drive the second wave of service growth. The authors argue that the second wave of service sector growth is driven by trade openness, democracy and proximity to financial sectors. Due to globalization processes, many countries have indeed become more open to trade and closer to financial centers.

Also known as the Service Sector or the Service Industry.


Source: Eichengreen, B. and P. Gupta (2011) “The Two Waves of Service-sector Growth” Oxford Economic Papers 65 pp 96-123

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