Basic Principles of Economic Classifications

1. Economic classifications Day 1 – first morning session Basic principles of classifications Marie-Madeleine Fuger (INSEE -France-) marie-madeleine.fuger@insee.fr Gheorghe Constantinescu (INSSE -Romania-) constantinescugh@yahoo.com

2. Definition of a classification • A language • Behind a given wording whatever the language, the same concept • A tool • No production of data without structuring reference • A model • Required for any comparisons

3. Role of a classification A classification is : A common language A vocabulary as well harmonized as possible Which allows a global knowledge on the organization and the production processes, on the outputs, etc. A selected view of a given universe different possible structures concerning a universe So one selected view Which includes pros and cons (that’s the life…) It is often the result of a compromise

4. Classification vs Nomenclature Nomenclature Historically “which names” the “nomenclator” named the Roman senators when they entered the Senate Extended to “which structures a universe” the “nomenklatura” in Former Soviet Union (the list of the “advantaged society) generally used in Latin language countries Classification “which structures a universe” e.g. Hierarchical ascendant classification (HAC of the multidimensional data analysis) Both words can be indifferently used In EU: NACE but CPA

5. What is a classification ? A classification is a tree-structure of successive partitions strictly linked

6. What is a classification ? Level 1 Item-father 100 200 etc Item-son Item-son 110 120 220 Level 2 210 Level 3

7. What is a classification ? It is a way to organize an universe in a unequivocal and structured way Each level is divided into mutually exclusive items Each item is linked to only one item from the upper level Each item-son is ALWAYS Either like the item-father Or a subset of the item-father It is NEVER a grouping of parts of various item-fathers Each item of a level represent an identifiable set of objects Each item is given a name and a code for easier management

8. The importance of coding 200 100 … 110 120 220 210 … 221 229 211 212 219 • Example : • 100 Goods • 110 Commodities • 190 Other goods • 200 Services • 210 Tourist services • 211 Transports • 212 Hotel and restaurants • 219 Other tourist services • 220 Works on a fee and contract basis • 221 Treatments of a partial process • 229 Other works • etc. (110) (120)

9. The universe Missing items : potential problems when coding and in IT systems A complete structure

10. Classification types Codes, catalogues One item = One object explicitly named e.g. geographical codes dictionnary Juridical classifications Items defined “in extension” Content list finished Statistical classifications Item defined “in comprehension” Content cannot be described as an exhaustive list

11. Central and dedicated classifications Dedicated : tool set up for a target or an environnment Surveys (collection), uses (synthesis, dissemination) Customs, prices, consumption, production, etc. HS, COICOP for IHCP and HBS, EU Prodcom, etc. Central : all uses To which converge the data provided by the dedicated classifications ISIC and CPC activities : structure the units (which perform activities); products: structure the objects produced and exchanged

12. Definition of a classification A classification defined by its structure is not self-sufficient Explanatory notes To describe the content of each item Notes at any level are useful Eventual references to other classifications but A classification must be understood alone Methodology How to use it : concepts definitions, rules To be relevant, updates and revisions are needed

13. Construction criteria Generally(by definition) Covering The whole concerned universe is covered All items independent Homogeneity Whatever the criteria : items as homogeneous as possible Relevance Items must be statistically interesting and generally accepted Continuity Statisticians are reluctant to changes :  breaks in their time series

14. Construction criteria : ACTIVITY An activity is defined by the triptych « input-process-output » An activity classification is defined according to these 3 criteria The production process An activity classification is not only a list items described by « Manufacture of… » or « Production of… » But essentially a set of « actions », eventually precised by physical or intangible outputs Inputs and outputs  All these criteria differently weighted depending on the domains and on the levels : production process is predominant for detailled categories and less important at more aggregated levels

15. Construction criteria : Products Different options may be considered List of products arranged in some logical sequence Market-oriented or demand based Intrinsic nature or physical caracteristics of the product Industry of origin Each methodology has pros and cons But, watch out boundary problems

16. Revision versus Update Revision New « view » New structure eventually, new concepts, new coverage So, a new classification Update Same structure Minor changes Precisions The same classification « younger »

17. Exercice Be a list of items (construction works) Objective : try to build a classification in 2 levels Define the concepts Define the classification criteria Propose headings : Level 1 has 2 subdivisions Level 2 has no more than 6 subdivisions

18. Economic classifications Thank you!