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Structural change in an economy can be intentional or unintentional, caused by factors such as technological advances, labor mobility, natural disasters, and government policies. It can have positive or negative effects on individuals and companies, and can lead to a more profitable or less profitable economic system.
A structural change is a fundamental change in the functioning of an economy. This type of change completely alters the way an economy previously functioned and can have both positive and negative effects on the individuals and companies involved in the change. Structural change can also cause an economy to become more robust and profitable, or to become a less profitable economic system. Factors that can affect an economy in terms of its structure include the availability or scarcity of goods and labor, technological advances, war, natural disasters, and a number of other factors.
Technological advances led to a structural change in national economies during the Industrial Revolution. Factory jobs replaced the subsistence economies that existed in many countries, and people often moved from rural areas to cities to work in factories for higher wages. Likewise, the development of the Internet has caused widespread changes in how economies work. Businesses often use the Internet to facilitate communications and the transfer of goods and services, whereas these tasks were previously completed using slower technologies that are now outdated or no longer used. The jobless recovery concept is a more recent example. As companies outsource jobs to other regions or countries, they are able to maintain profit margins. At the same time, local economies are changing as workers still cannot find jobs.
A structural change in an economy can be intentional or unintentional. A modern example of an attempt at intentional structural change is pressure from governments to switch nations to alternative forms of energy. If the oil industry were replaced by alternative technologies, it could lead to widespread structural changes in the functioning of economies, particularly in advanced countries. An example of unintentional change is a prolonged drought that causes crop failures. If a region cannot grow enough food to support its population, the economy can shift so that more commercial goods are produced to import food and more individuals can try to grow their own food to make up for the shortage.
Labor mobility can cause structural change in an economy. Workers generally choose to move to another region if it benefits their economic or professional situation. High property taxes, high cost of living, and expensive goods often make it attractive for workers to move to a new location. If this happens often enough, it can cause a labor shortage in the city or region of origin. This, in turn, can force companies to change the way they do business, and eventually, structural changes take place as the economy adjusts to scarcity and companies assume new modes of operation.
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