After the empirical analysis of industrial structure and economic development in Shan Dong Province, the passage proves that the secondary industry, especially heavy industry, being inefficient, is the most important driver of economic development and the tertiary industry accounts for a large part, while the primary industry which contributes to the development of economy greatly occupies the least proportion. At the same time, the research how the policy node before 1992 and after that influenced the output elasticity shows that the introduction of market economy competition has a bad influence on the primary industry output elasticity while contributes to the increase of the the tertiary industry. Amazingly, there is no obvious effect on the secondary industry.