Standardization of economic activity classifications in Europe

Classification of economic activities and the integrated system of economic classifications

 

The object of the statistics is to provide information in a clear and usually aggregated form to provide  a good summary of the underlying population data. Therefore, one of the basic requirements for statistical work is the existence of a recognized system for classifying the available statistical data, so that they can be usefully presented and analyzed. Such binding system are called classifications.

 

Industrial Classification Systems Mapping
Industrial Classification Systems are an essential element of economic analysis in the modern age.

Different requirements for economic statistics require different classifications required. Therefore, classifications for various purposes have been developed. No classification can meet all the requirements in the same way.

Activity classifications are used to categorize data relating to statistical units, that is in a single operation or a group of sites that an economic whole, a company form or their parts (technical operations or parts of companies). They are the basis for the compilation of statistics on production values, which has flown into the production process factors of production (labor, equipment and materials, energy, etc.), capital formation and financial transactions of these units.

Product classifications are used for classification of goods (goods and services) with uniform characteristics. They are the basis for the compilation of statistics on production, domestic trade, consumption, foreign trade and transport of these goods.

 

Industrial Classification Systems Mapping
Activities with uniform characteristics are grouped together under a single classification code.

Statistical classifications have the following features:

  • full coverage of the observed
  • mutually exclusive categories, each element may be classified in only one category of the classification
  • methodological principles which allow the consistent allocation of the elements to the various categories of classification.

Hierarchical classifications are characterized in that their categories are subdivided deeper. This allows the extraction and presentation of information at different aggregation levels.

In the past, international organizations and individual countries have classifications mostly independently – according to the particular application – developed. The increasing international interdependence of economies increased the need for comparable, timely economic data significantly. As a result of the late 80s/early 90s of the 20th century – mainly under the auspices of the United Nations – a system of economic classifications developed that takes into account this need for harmonization. This had partly national perspectives behind the interest in a better comparability of data design.

 

Classification of economic activities and the European Union (EU)

 

Industrial Classification Systems Mapping
First steps in the creation of European industrial classification framework were made in the 1960s.

At EU level, there were the following development of the activity classifications:

 

In 1961 to 1963: the classification of the branches of the manufacturing industry in the European Communities (was NICE) worked out, first (1961) in coarse-structured form (three digit positions) and then (1963) in a revised version with a deeper breakdown. The NICE covered extractive, energy and manufacturing industry, and construction.

 

1965: Nomenclature of trade in the EEC (NCE) was established that included all branches of trade.

 

1967: a nomenclature for services was developed, followed by a – broad divisions – nomenclature for agriculture.

 

1970: Finally, the General Classification of Economic Activities in the European Communities (NACE) has been set up. As the name suggests, it involves a classification that included all economic activities. In this classification, a distinction was made for certain services depending on whether they are market services non-market services provided by government or non-market services of non-profit organizations.

 

Since the NACE 1970: as no corresponding European regulation gave legal validity, data were often collected according to the existing national classifications and then recoded to the NACE 1970, which led at European level to restricted data compatibility. In addition, the NACE was 1970 not developed within a recognized international framework, whereby it offered poor comparability with other international classifications of economic activities. Since the introduction of NACE 1970 the economic structure had changed significantly in some areas. Furthermore, the need for meaningful, current economic data was increased significantly by progressive international integration of national economies, so that a greater harmonization of statistical tools was required in this case of the surveys underlying classifications.

 

The starting point of the harmonization exercise was the third revision of the International Classification of Economic Activities (ISIC Rev. 3). It was made by a joint working group of the Statistical Office of the United Nations and the Statistical Office of the European Communities (Eurostat) with the close involvement of representatives of the Member States and approved by the Statistical Commission of the United Nations in February 1989.

Then by a committee composed of representatives of Eurostat and the Member States Working Group, a revised version of NACE 1970 was created and named the Statistical Classification of Economic Activities in the European Community (NACE Rev. 1). The NACE is – according to the concept of the ISIC – a classification of economic activities that no longer discriminates whether certain services is market determined or is not market determined or whether they are provided by companies, by the government or by non-profit organizations.

 

Karl Müller

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