Agricultural and Industrial Sector Evolution Analysis
Evolution of the Agricultural Sector
Until the end of the 1950s, this sector was defined as traditional agriculture with two basic features:
- A factor endowment characterized by labor-intensive and poorly paid work, and low capital-output.
- Balanced food supply and demand, with traditional agricultural products playing a key role.
With the economic growth of the 1960s, these traits altered:
- Migration from the countryside to the city implied a decrease in the agrarian population.
- Urbanization and a rising standard of living led to increased food demand while diversifying the diet.
Since then, the agricultural sector has faced different challenges and contradictions. Initially, the challenge was to increase production, but in recent years, the challenge has been the opposite.
Today, agriculture faces new challenges related to environmental issues and food security.
Specialization in Industrial Production
In the mid-1960s, core manufacturing output was in traditional activities, accounting for 70% of value added. At the other extreme, advanced manufacturing represented 4%.
Currently, the core of the industry is still in traditional activities but to a lesser degree, since intermediate activities have grown at a faster pace.
Until the mid-1990s, there was a progressive decrease in the weight of traditional manufacturing and an increasing involvement of intermediate manufacturing. Since then, this pattern has reversed, with advanced manufacturing growing at rates above the traditional. Advanced manufacturing has further reduced its participation, with computers and electronics activities losing more ground.
This specialization is not the most appropriate from the perspective of growth and external balance, not only due to the insufficient development of advanced manufacturing but also because the traditional and intermediate sectors do not show a solid competitive position, as evidenced by the traditional negative trade balances.
Evolution of Industrial Productivity
1960-1995: Industrial productivity growth was based on increasing labor productivity, to the extent that the existing employment in 1995 was virtually the same as in the mid-1960s.
Since 1995: Labor productivity has remained stagnant, in contrast to the progress of the product, so that industrial growth has been supported in recent years by a remarkable capacity for employment generation, influenced by the influx of immigrants.
The three groups of manufacturing have been affected by the reduction in the rate of growth of labor productivity, although it has been more pronounced in more advanced activities, contrary to what happens in the EU.
The difficulties these activities face in improving their productive efficiency and competitiveness help to explain the intense process of business relocation in the first years since 2000.
Grading of Services
Services are classified according to several criteria:
- Market services and non-market services: In the first, transactions are conducted on a commercial basis, and in the second sector, services are supplied by the public free of charge to the consumer at prices not related to their production costs.
- Intermediate services: These are used in the production processes of other economic activities, or final services for final consumption.
- Stagnant or progressive services: The first are those that cannot reduce their labor needs per product without compromising the quality or quantity produced. The others are those that record significant productivity gains.