Sectoral Growth Theory

Sectoral Growth Theory suggests that economic growth occurs through shifts in the economy’s focus among different sectors—such as agriculture, manufacturing, and services. As a country develops, resources tend to move from agriculture to industry and then to services, driven by technological progress and changing consumer demands. This reallocation boosts overall productivity and income. The theory highlights how structural changes within the economy’s sectors are fundamental to sustained growth, with each sector’s relative importance evolving over time to reflect modernization and improved living standards.