The ability of current statistical classifications to separate services and manufacturing

Jesper Christensen

Structural Change and Economic Dynamics, 2013, vol. 26, issue C, 47-60

Abstract: This paper explores the performance of current statistical classification systems in classifying firms and, in particular, their ability to distinguish between firms that provide services and firms that provide manufacturing. We find that a large share of firms, almost 20%, are not classified as expected based on a comparison of their statements of activities with the assigned industry codes. This result is robust to analyses on different levels of aggregation and is validated in an additional survey. It is well known from earlier literature that industry classification systems are not perfect. This paper provides a quantification of the flaws in classifications of firms. Moreover, it is explained why the classifications of firms are imprecise. The increasing complexity of production, inertia in changes to statistical systems and the increasing integration of manufacturing products and services are some of the primary and interrelated explanations for this lack of precision. We emphasise, however, that such classification problems are not resolved using a ‘technical fix’. Any statistical classification method involves a number of tradeoffs.

Keywords: Industry classification; Services; Industrial dynamics (search for similar items in EconPapers)
JEL-codes: C81 E01 L10 L80 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:streco:v:26:y:2013:i:c:p:47-60

DOI: 10.1016/j.strueco.2013.06.002

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