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The ability of current statistical classifications to separate services and manufacturing

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  • Christensen, Jesper Lindgaard

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.

Suggested Citation

  • Christensen, Jesper Lindgaard, 2013. "The ability of current statistical classifications to separate services and manufacturing," Structural Change and Economic Dynamics, Elsevier, vol. 26(C), pages 47-60.
  • Handle: RePEc:eee:streco:v:26:y:2013:i:c:p:47-60 DOI: 10.1016/j.strueco.2013.06.002
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    References listed on IDEAS

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    Cited by:

    1. D’Adamo, Gaetano & Rovelli, Riccardo, 2015. "The role of the exchange rate regime in the process of real and nominal convergence," Journal of Macroeconomics, Elsevier, vol. 43(C), pages 21-37.
    2. D'Adamo, Gaetano & Rovelli, Riccardo, 2013. "Labor Market Institutions and the Response of Inflation to Macro Shocks in the EU: A Two-Sector Analysis," IZA Discussion Papers 7616, Institute for the Study of Labor (IZA).
    3. D'Adamo, Gaetano & Rovelli, Riccardo, 2015. "Labour Market Institutions and Inflation Differentials in the EU," IZA Discussion Papers 9389, Institute for the Study of Labor (IZA).

    More about this item

    Keywords

    Industry classification; Services; Industrial dynamics;

    JEL classification:

    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L80 - Industrial Organization - - Industry Studies: Services - - - General
    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts

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