1. ECONOMIC CLASSIFICATIONS Advanced course Day 2 – first morning session Statistical units and classification rules
Zsófia Ercsey - KSH – Hungary
Marie-Madeleine Fuger - INSEE – France
Hans Van Hooff - CBS - Netherlands
THE CONTRACTOR IS ACTING UNDER A FRAMEWORK CONTRACT CONCLUDED WITH THE COMMISSION

2. Activity classification
Plan of session
Activity classification
Principal, secondary and ancillary activities
Statistical units
General classification rules
Top down method
Specific classification rules for some activities
Classification rules in practice

3. Example: BlaBla Limited
Blabla describes its activities as:
- production of small and big BlaBla;
- promotion and sale of BlaBla;
- holding the building of BlaBla;
- transport of BlaBla to the clients;
- 21 BlaBla-shops;
- giving BlaBla workshops and courses.

4. Type of activity First question:
Are activities producing for the market
or only for the unit itself?
For the market  Main (principal) or secondary activity
Internal (for the own unit)  ancillary (they facilitate the main or secondary activities)
Not sold on the market
Just performed for the unit
Generally performed in all similar units
In most cases services

5. What is the main activity:
Classification rules
What is the main activity:
the activity that contributes most to the value added (=sales – production costs)
If an activity > 50% of value added main activity.
in other cases: the top down method:
Start with the highest NACE-level, determine the activity with most value added,
then the same for the second level,
and so forth, until the lowest level.

6. The « top-down » method
100 8 52 40 38 2 8 28 24 2 3 35 8 20 24 2 35 3 8 20 24 2 35 3 8 24 20 20

7. The « top-down » method to order the secondary activities
100 8 32 40 38 2 8 24 2 3 35 8 24 2 35 3 8 24 2 35 3 8 24 20
First secondary activity

8. The « top-down » method to order the secondary activities
100 8 32 5 3 2 8 24 2 3 8 24 2 3 8 24 2 35 3 8 24 20
Second secondary activity

9. The « top-down » method Why??
the classification of a unit at the lowest level must be consistent with the classification of the unit at the higher levels of the structure.

10. The « top-down » method
100 8 52 40 38 2 8 28 24 2 3 35 8 20 24 2 35 3 8 20 24 2 35 3 8 24 20 20

11. The « top-down » method
For wholesale and retail trade more refined on class level (=lowest)
Why?
Additional levels that are not part of the NACE structure itself, e.g.
Own-account vs. fee-based
Specialized vs. non-specialized
Shops vs. on-line, market
(practical reasons, lack of codenumbers)
Similar distinctions do not exist for other activities, such as manufacturing.

12. Top-down method in NACE 2 retail sale
Division 47
47.1 – 47.9
in store out of store
47.1 – – 47.9
in non-specialized stores in specialized stores on markets elsewhere – …
Vegetables, meat

13. Top-down method in NACE 2 wholesale
Division 46
46.1 – 46.9
Specialized and non specialised wholesale trade
46.2 – 46.9
Wholesale on a fee or
contract basis
46.1
Non specialised
46.9
Specialised
46.2 – 46.7
46.2
46.3
46.4
46.5
46.7
46.6

14. Value added and proxies
If data on value added are missing, use the best approximates possible:
based on outputs
gross output (sales - purchases) or
just sales (turnover)
based on inputs
wages and salaries or
employment

15. Frequent Change of Activity of a Unit
Units pingponging from
activity A  B vice versa:
Seasonal business (beach-skating; agriculture)
Main activity for the whole year.
Borderline cases: 49-5151-4949-51 etc.
 The stability rule: after two years stabilitychange

16. Additional classification rules
Classification rules for specific production phenomena
vertical integration
production on a fee or contract basis / outsourcing

17. Treatment of vertically integrated activities
Different stages of production in succession by the same unit;
The output of one process is input for the next.
Examples:
tree felling and sawmilling
production of wearing apparel in a textile mill

18. Treatment of vertically integrated activities
like any other unit with several activities: via value addedtop-down the main activity
value added (or proxies) may be difficult (intermediate products don’t come on the market) comparisons with similar units or estimation of intermediate products based on market prices.

19. Outsourcing - manufacturing
Output of outsourced activities:
If principal owns the materials:
Principal
=manufacturing
Contractor =manufacturing
Service (done to a good of the principal)
Good

20. Outsourcing - manufacturing
Output of outsourced activities:
If principal doesn’t own the materials:
Principal
Contractor =manufacturing
Good

21. Outsourcing – services
if the whole service process is outsourced  both the principal and the contractor in the same NACE class
if only a portion is outsourced, the principal remains classified as if carrying out the whole process
If a separate class exists for the outsourced portion, the contractor is classified there, otherwise in the same class as the principal

22. Outsourcing – ancillary activities accounting, computer services etc.
The principal is classified as if carrying out the whole core process ancillary activities do not influence the classification of a unit.
The contractor is classified to the specific support function carried out.
These and many other outsource-cases:
Eurostat -->Outsourcing manual

23. Thank you!