Statistical Classifications Systems Part I Md. Dilder Hossain

2 Contents Introduction Main characteristics of statistical classifications Principles of statistical classifications Use of classifications Methodological issues of statistical classifications International Family of Economic and Social Classifications

Contents International Standard Industrial Classification –Economic activities –Statistical units –Construction of ISIC Central Product Classification Classification of Expenditure According to Purpose 3

Introduction to Classifications Classifications - group and organize information meaningfully and systematically into standard format that is useful for determining similarity of ideas, events, objects, persons The preparation of a classification – the creation of set of categories (employment: unemployed and employed; sex: male and female). Categories need to be: –comprehensive and well-structured –mutually exclusive and well-described –presented as a hierarchy that is reflected by the numeric or alphabetical codes assigned to them 4

Introduction to Classifications (Contd.) Examples: –Type of economic activities –Type of products/goods/ services –Types of transactions, accounts in SNA –Type of goods, services traded –Types of Occupations –Gender –Health Problems, Diseases, Disability, etc. 5

Introduction to Classifications (Contd.) A Statistical classification: –a set of discrete categories –assigned to a specific variable in a statistical survey/ administrative file –used in the production and presentation of statistics Standard classifications: –agreed and standardized at national or international levels International standard classifications – developed by international organizations to standardize national and international communication –used through all phases of the statistical process 6

Introduction to Classifications (Contd.) 7 Classification in System of National Account (SNA): Classification of Institutional Sectors Classification of Transactions; Balancing Items Classification of Non-Financial and Financial Assets International Standard Industrial Classification of all Economic Activities (ISIC) Central Product Classification (CPC) Classification of Individual Consumption by Purpose (COICOP) Classification of Function of Government (COFOG) Classification of Product of Non Profit Institutions (COPNI) Classification Of Selected Outlays Of Producers By Purpose (COPP)

Main characteristics of Statistical Classifications A strict and detailed hierarchical organization of the categories. Complete coverage of the population observed Mutually exclusive categories Data should be –Homogeneous within the group –Heterogeneous between groups Classification is ruled by consistent methodological principles 8

9 Principles of Statistical Classifications Objectives and statistical priorities to be served must be clearly statedObjectives and statistical priorities to be served must be clearly stated The organization (custodian) responsible for the preparation and maintenance of a classification should be clearly identified and responsibilities statedThe organization (custodian) responsible for the preparation and maintenance of a classification should be clearly identified and responsibilities stated A well-defined classification structure must be preparedA well-defined classification structure must be prepared Aggregated categories organized in a hierarchyAggregated categories organized in a hierarchy

Principles of Statistical Classifications (contd.) Instructions are needed on effective use of classifications for data collection and analysis Guidance and training material needed for a new or revised classification Descriptive definitions or complete listings of the contents of the defined categories are needed. 10

Use of statistical classifications To support the implementation of regulatory policies such as customs regulations or criminal legislation To standardize concepts of public services such as job placement, education, welfare or public health etc. to describe social, economic or natural phenomena Standard classification-in general use 11

12 (Contd.) Use of statistical classifications (Contd.) In collection of dataIn collection of data In organization of collected dataIn organization of collected data Aggregating and disaggregating of data sets meaningfully for purposes of analysisAggregating and disaggregating of data sets meaningfully for purposes of analysis Presenting statistical informationPresenting statistical information Construction of classification for a different variable, e.g. the socio-economic status classificationConstruction of classification for a different variable, e.g. the socio-economic status classification As models for development/revision of related classifications.As models for development/revision of related classifications.

13 Use of Statistical Classifications for Policy Decisions Legal importance and policy relevance are factors affecting the development and use of many classifications. For example: Strong link betweenLegal importance and policy relevance are factors affecting the development and use of many classifications. For example: Strong link between Harmonized System (HS) and customs regulations and agreementsHarmonized System (HS) and customs regulations and agreements Classification of diseases and death in the ICD (International Statistical Classification of Diseases and Related Health Problems) and the formulation of prevention and treatment programmesClassification of diseases and death in the ICD (International Statistical Classification of Diseases and Related Health Problems) and the formulation of prevention and treatment programmes Categories of ICD used for determining scope of insurance (Cause of death classified as suicide may be compensated differently by insurance programmes than a death classified as accidental)Categories of ICD used for determining scope of insurance (Cause of death classified as suicide may be compensated differently by insurance programmes than a death classified as accidental)

Use of Statistical Classifications for Policy Decisions (contd.) The categories specified for a classification must be regularly evaluated for possible legal and policy implications Classifications – applied to people must consider issues of human rights (International Classification of Impairments, Disabilities and Handcaps – ICIDH) Regular hearings or meetings should be conducted 14

Methodological issues of Statistical Classifications Users’ requirements issues –Who the users are? –How they will be using the classification? Harmonization Conceptual issues Collection of necessary information Classification structure Maintaining, updating, revising of classifications 15

Harmonisation Harmonization: –reconciliation of different classifications and statistical standards into a common framework, –maximizing the correspondence between them Harmonization involves – the establishment of mutually consistent categories for the same or for closely related variables The objective of harmonization of statistics – to make it possible to combine or compare data for –different populations –different periods –different data collection methods –different statistical units 16

Conceptual issues Scope of classification Main variable and primary units for which the main variable can be observed Rules for linking different statistical units to classifications Rules for identifying same value of the variable Similarity criteria used to define higher level categories in hierarchical classifications 17

Collection of necessary information How to collect the information which describes the defined categories and the dividing lines between them? Construction of classification rely on subject matter experts and other secondary sources of information 18

Classification structure Classification structure refers to the arrangement of the content of a classification Rule for identifying the statistical units for: –same category of a classification –different categories of a classification Similarity criteria used to define higher level categories 19

Classification structure (contd.) Explanatory notes (descriptions, listing of what to include and exclude) Correspondence tables –Explain where, and to what extent, concepts and categories in one classification, may be found in other classifications 20

Maintaining and up-dating the classification Maintenance: correction of errors Maintenance and updating is ongoing activity of the custodian of a classification Up-dating: –modifying the descriptive definitions –introducing new, detailed categories 21

22 International Statistical Classifications (ISC) Developed and adopted by international institutions; require approval of UN Statistical Commission (UNSC) or other competent intergovernmental board: WCO, WHO, IMF, ILO depending subject matterDeveloped and adopted by international institutions; require approval of UN Statistical Commission (UNSC) or other competent intergovernmental board: WCO, WHO, IMF, ILO depending subject matter Products of international agreements among national authorities responsible for statistics in the respective areasProducts of international agreements among national authorities responsible for statistics in the respective areas Standardize national and international communicationStandardize national and international communication Ensure correct implementation of agreementsEnsure correct implementation of agreements

23 ISCs- (Contd.) Custodians of ISCs are usually international agenciesCustodians of ISCs are usually international agencies Custodians of National Statistical Classifications are the National Statistical Agencies (NSAs)Custodians of National Statistical Classifications are the National Statistical Agencies (NSAs) Custodians are required to maintain and updateCustodians are required to maintain and update Custodians develop a network of technical advisers who are both producers and users of statistics for updatingCustodians develop a network of technical advisers who are both producers and users of statistics for updating

Types of classifications Within each subject matter area : –Reference classifications –Derived classifications –Related classifications 24

Reference Classifications Those that achieved broad acceptance Product of international agreements through approval by the UNSC or another competent intergovernmental board such as WCO, WHO, IMF, UNESCO or the ILO depending on subject area Approved and recommended as models for the development or revision of corresponding classifications with respect to: –The structure –The character and definition of the categories 25

Reference Classifications (contd.) Means of harmonization of international statistics Guidelines for the preparation of national classifications 26

Reference Classifications: Examples Harmonized Commodity Description and Coding System (HS) International Standard Industrial Classification of All Economic Activities (ISIC), Rev.4 Central Product Classification (CPC),Ver.1.0 International Standard Classification of Education (ISCED 1997), UNESCO International Standard Classification of Occupations (ISCO-88), ILO,

Requirements for Reference Classifications Usable for data collection and presentation at international level Guidelines for national and multinational classifications Have to be general enough to –be applicable to all countries –provide room for national adaptation and specifications Have to be specific enough to –allow for useful data collection –provide reasonable guidelines for creation of national classifications Orchestrated updates within the international statistical classifications. (review ISIC & CPC in 10/5 year intervals) 28

Derived classifications Based upon reference classifications. Groups obtained by re-arrangement / sub- divisions of items from reference classification Adopt structure- consistency of aggregates Respect building blocks- additional detail where necessary Tailored for use at national or multinational level Ex: -General Industrial Classification of Economic Activities within European Communities (NACE), based upon ISIC - ISCO-88 (COM) developed for Eurostat on the basis of ISCO-88 29

Related classifications Classifications that partially refer to reference classifications, or Associated with the reference classification at specific levels of the structure, only. Linked mainly through correspondence tables –many links will refer to partial correspondences Ex: - North American Industry Classification System (NAICS) related to ISIC, by being compatible with it at 2-digit level, - Australia New Zealand Standard Industrial Classification (ANZSIC) related to ISIC 30

Example: Activity classifications Reference classification –ISIC Rev.3.1 Derived classification –NACE Rev.1.1 Related classifications –NAICS, ANZSIC 31 ISIC Rev. 3.1 NAICS NACE Rev. 1.1 ANZSIC National Versions

32 NACE ISIC NACE (France) NACE (Germany) NACE (Spain) Activities National versions of NACE Products CPC CPA National Product Classifications

Correspondence / Links across Classifications The extent of correspondence and harmonization possible between different classifications depends on: –The degree to which the various categories are the same –The conceptual links which can be established between them. For instance: COFOG, COPNI, COICOP and COPP: –are all concerned with the same type of variables, namely expenditures according to purpose 33

Correspondence / Links across Classifications (contd.) –But their scopes are different - purpose of the expenditures made by a particular type of institutional unit, as defined in SNA, namely: government; non-profit institutions serving households; households and producers respectively –For all these classifications education and training as one type of purpose, however, goods and services actually brought are different. For instance: for HHs – for purchasing of educational services for individual HH members; for Government – expenditures for educational services at the institutional level. 34

Correspondence / Links across Classifications (contd.) Scopes of these classifications are intended to cover all possible types of units having economic transactions Therefore, the purpose of all transactions considered as “economic” according to the total scope of the SNA. 35

Correspondence / Links across Classifications (contd.) Correspondence between COFOG (government expenditures on education) and ISCED (educational programmes), requires: –set of expenditures classified by COFOG nested within ISCED scope of educational programmes –links between the units of COFOG (economic transactions) and ISCED (programmes) defined / identified –categories on education and training expenditures in COFOG compatible with ISCED for educational activities 36

37 International Work on Classifications UN Statistical Commission UNSDILOUNESCOWHO Member countries Expert Group on International Economic and Social Classifications

38 Technical Subgroup on Classifications Established in November 1999 by EGEstablished in November 1999 by EG Meets twice a year Meets twice a year Reports to EG on progressReports to EG on progress EG acts as steering committeeEG acts as steering committee