1. Measuring and improving the NACE coding in the Business register
International Roundtable on Business Survey Frames
October 21-26, Wiesbaden
Norbert Rainer, Thomas Karner
Measuring and improving
the NACE coding in the Business register
Session 3

2. Overview Introduction
Primary sources for the NACE code in the Austrian BR
Classification notification
Analysis of the changes of the NACE code
Correctness of the NACE Code
Stability of the NACE Code
Concludings remarks
Session 3

3. Introduction Correct activity code for an enterprise means:
Sophisticated issue for business registers
Difficult and complex work (e.g. complex activity profiles)
Information quite scarce
Activity profiles may change over time
Negative correlation:
The complexity increases with the decrease of the enterprise
„big“ enterprise (e.g. a refinery) often has an obvious activity and they more likely take part on surveys
Small enterprises (e.g. IT area) has to be flexible in reacting on market changes (software, trade, repair, consultancy, training, …)
Session 3

4. Introduction
Goal: Concept for the measuring and improving the quality of the NACE Code
Limited resources (e.g. staff) in the business register
No more additional burden for the enterprises
Implementation of NACE Rev. 2 as a starting point
Basic idea:
Concentrade on those activities where
The probability of a correct NACE coding is smaller (correctness rate)
The probability the a enterprise changes it‘s activity to a different NACE section is higher (stability rate)
Session 3

5. Primary sources for the NACE coding
Four sources for the Austrian business register
Company register
 official, public register covering companies
Social security register
 employers
Tax register
 tax subjects
Membership register of the Austrian Economic Chamber
compulsory membership (except free lancers)
only source on the level of local units
The sources have to be used together and simultaneously
So all information needed to fulfill the current EU regulation is available
Session 3

6. Primary sources for the NACE coding
Problems
Each source has it‘s own identifier system
 matches are performed on basis of name, adress, …
Coverage of the sources is different
 company < social security < economic chamber < tax
Definition of units is different
Concepts dealing with population changes are different
Only social security register and tax register provides NACE code
Done by the staff of these administrations  first contact with unit (activity changes??)
Textual information provided by the unit (tax/security form)
Quality quity low (1/3 of the codes different)
Sole information in many cases (small enterprises)
Session 3

7. Classification notification
Federal Statistics Law (2000) obliges Statistic Austria to inform the enterprises on their classification code
Enterprises need the code for other administrative procedures (e.g. financial promotion, …)
Procedure
Enterprise does not accept the classification
E. provides information about the economic activity to Statistics Austria (kind of questionnaire included)
Statistics Austria has 4 weeks time to accept the statement of the enterprise ( correction of NACE code)
or to forward it to the federal ministery ( not neccessary up to now)
Session 3

8. Classification notification
Dispatch
New Enterprises in the BR
Change of name or adress
Change of the NACE code
On demand
Start in the year 2001
notifications mailed
7% received back (60% NACE corrections)
That means overall in 4,2% a correction of NACE code was neccessary
Session 3

9. Classification notification
What about the remaining 93%?
NACE code correct???
Classification notification ignored???
From 2007 onwards
Enterprises are asked to give feedback (special form) also when the classification is correct.
26% CN-okay cases in 2007
Session 3

10. The Correctness of the NACE code
Analyses of the changes of the NACE code
The Correctness of the NACE code
Session 3

11. Analyses of the changes of the NACE code
Definition of a rate of correctness (CR)
Period: from 2000 onwards  long term structure
All enterprises without activity changes  including the already closed ones
Problems: No differentiation because of:
Real change in main activity
Mergers or simular events
Interpretation of NACE has to be corrected
Session 3

12. Analyses of the changes of the NACE code
Correctness Rate
– first results I
Section
Number of enterprises
(legal units)
Number of enterprises (legal units) without NACE change
Correctness rate (CR)
Manufacturing
41.829
35.253
84,3%
Energy
1.939
1.708
88,1%
Construction
39.499
36.425
92,2%
Trade
88,6%
Hotels, restaurants
75.852
71.842
94,7%
Transport
26.327
24.906
94,6%
Finance
12.048
11.027
91,5%
Business act.
83,3%
Education
4.687
4.079
87,0%
Health
30.965
29.359
94,8%
Personal services
38.618
34.351
88,9%
Sum
Session 3

13. Analyses of the changes of the NACE code
Correctness rates for special activites
High rate of correctness
Cemetries (99%)
Hairdressers (98,1%)
Legal activites (98,8%)
Taxi operation (97,6%)
Retail trade of tabacco (98,1%)
Veterinary activities (99,8%)
Dental surgeon (99,0%)
Reasons?
Special education
activity is obvious per se
traditional activities ( name of enterprise provides information)
Yellow pages, membership in organisations
Session 3

14. Analyses of the changes of the NACE code
Correctness rates for special activites
Smaller rates of correctness
Computer and related activities (50-60%)
Catering (78.5%)
University (32,8%)
...
Reasons?
Interpretation more difficult
No predominant activity?
The industry is developing
Change of NACE interpretation (university lecturers)
Session 3

15. The stability rate of the NACE code
Analyses of the changes of the NACE code
The stability rate of the NACE code
Session 3

16. Analyses of the changes of the NACE code
Stability rate of NACE code on section level
Session 3

17. Analyses of the changes of the NACE code
All in all around changes (2000 till 2006)
Net changes are nearly balanced
55,4% of these changes result in the same section
This ratio is above the average in
Health (70,9%), trade (62,6%), business services (61,6%) and hotels and restaurants (58,7%)
and it‘s lower in
Education (36,5%), Construction, (36,6%), Personal services (36,9%)
Reasons?
Construction  architectural services?
IT-services  trade?
Manufacturing  trade?
...  next step of analyse
Session 3

18. Analyses of the changes of the NACE code
Detailed analyse of construction
36,6% change within section
29,6% moved to business services
Mainly:
Engineering activities
Letting of own property
Development and selling of real estate
Holding companies
14,1% moved to manufacture
Furniture
Metal structures and parts of structures
Builders carpentry and joinery
Session 3

19. Analyses of the changes of the NACE code
Detailed analyse of manufacture
44,8% change within section
25,1% moved to trade
Mainly:
Wholesale of other machinery for use in industry
Retail sale of hardware, paints and glass
Repair n.e.c.
14,3% moved to business services
Letting of own property
Holding companies
Engineering activities
Other business activities n.e.c.
Session 3

20. Analyses of the changes of the NACE code
Detailed analyse of health
70,9% change within section
25,1% moved to business services
Mainly:
Business and management consulting
Letting of own property
7,5% moved to personal services
Other servies activities (e.g. esotericism)
Physicall well-beeing activities
Session 3

21. Analyses of the changes of the NACE code
Detailed analyse of education
36,5% change within section
34,4% moved to business services
Mainly:
Business and management consulting
10,3% moved to health
Social work
Phsychotherapists and other human health activities
Session 3

22. Concluding remarks
Differences between the correctness rates (CR) could be found
Some sections or activites have high CR‘s
Classification work has to be concentrated on the activites with lower CR
Relations between activities were identified
Plan for the furture:
Classification check lists for the staff of the BR
When activity „A“ changes, which new activities have the highest probability
Session 3

23. Concluding remarks BR concepts has to be expanded
Results may be biased
Data from the BR without special quality or „NACE-history“ variables  various reasons for NACE changes possible, but not identifiable:
Information on the reasons for NACE change
Information about quality checks
...
NACE Rev. 2 Implementation as a perfect occasion
In 2008 a classification notification is mailed to every enterprise of the BR
A lot of information will result, which has to be integrated into a „strong“ new BR software tool
Session 3

24. Thank you for attention !
THE END
Thank you for attention !
Session 3