1. Classification systems within business registers – Session 3 ITALY - ISTAT
New economic classification and new instruments for Business Register classification: an opportunity to improve the quality in the Business Register
Simone Ambroselli Paola Vicari
In “20th International Roundtable on Business Survey Frames – Wiesbaden Group on Business Registers”
Wiesbaden, October 2007

2. NACE REV. 2 Change in the EU legislation Activities carried on
20th International Roundtable on Business Survey Frames
– Wiesbaden Group on Business Registers
NACE REV. 2
Change in the EU legislation
Implementation of the new version of the classification of economic
activities (NACE REV. 2)
Activities carried on
Implementation of the new Italian version of the classification of economic activities (ATECO 2007)
Close cooperation with Administrative sources:
Same details
Same interpretations
Reclassification of the Italian Business Register (ASIA) according to the new version
Mix of strategies
Wiesbaden, October 2007

3. DIFFERENT TOOLS ITALIAN BR ASIA LARGE ENTERPRISES
20th International Roundtable on Business Survey Frames
– Wiesbaden Group on Business Registers
DIFFERENT TOOLS
ITALIAN BR
ASIA
LARGE ENTERPRISES
SMALL AND MEDIUM ENTERPRISES
In terms of number of
employees and/or turnover
ACTR
SPECIAL SURVEYS
SECTOR STUDIES
STAFF - CLERICAL ACTIVITIES
Available human resources: 15,500 enterprises recoded
Around 4,400,000 units
Wiesbaden, October 2007

4. LARGE ENTERPRISES Experts Training course Available sources
20th International Roundtable on Business Survey Frames
– Wiesbaden Group on Business Registers
LARGE ENTERPRISES
Experts
Experienced Staff in specific sections of economic activity classification
Regional Offices Staff: closer to enterprises
Training course
Illustrate new classification (NACE and national version)
Use of correspondence tables (NACE and national version)
Principal and secondary activities
Contents of the available sources
Available sources
Balance sheets
Notes
Websites of the enterprises
Websites of Trade Associations
Statistical data from:
PRODCOM survey data-base
Foreign Trade survey data-base
Wiesbaden, October 2007

5. LARGE ENTERPRISES: QUALITY TEST
20th International Roundtable on Business Survey Frames
– Wiesbaden Group on Business Registers
LARGE ENTERPRISES: QUALITY TEST
Expert 1
Experienced Staff
And
Regional staff
Expert 2
Ent. to check 1
Ent. to check 2
Sample of ent. 2
Sample of ent. 1
Ok 5 digits: 80%
Ok 2 digits: 10%
Only Experienced Staff
Different: 10%
Problems:
More than one activity
Division 29 and 31
Final assignment
Wiesbaden, October 2007

6. ACTR (I) Automatic Coding by Text Recognition
20th International Roundtable on Business Survey Frames
– Wiesbaden Group on Business Registers
ACTR (I)
Automatic Coding by Text Recognition
Generalized software developed by Statistics Canada
Assign a fifth digit code to a description no longer than 200 boxes
Dictionary:
all the headings and the explanatory notes of the classification;
all the descriptions of the connected classification, for example PRODCOM;
the “empirical texts”, “captured” in the previous business surveys (around 20,000 texts)
Inputs for the implementation:
texts from the Chambers of Commerce (where enterprises register their own economic activity)
Wiesbaden, October 2007

7. ACTR (II) Problems Normalization Tool on the website
20th International Roundtable on Business Survey Frames
– Wiesbaden Group on Business Registers
ACTR (II)
Problems
Texts full of characters unrelated with economic activity
Texts that list more than a single economic activity
Normalization
To obtain good results is necessary (steps):
cut superfluous words or words’ segments (356 found in the Italian experience)
reduce the length: divide texts after “.” and “;”
analyze shorter description
Tool on the website
On line consultation useful in particular for enterprises and institutional
users (use a common tool)
Expand ACTR dictionary
Wiesbaden, October 2007

8. SPECIAL SURVEYS Reasons Fields (in terms of NACE REV. 2)
20th International Roundtable on Business Survey Frames
– Wiesbaden Group on Business Registers
SPECIAL SURVEYS
Reasons
Available tools not sufficient to identify new activities in NACE REV. 2
Fields (in terms of NACE REV. 2)
Consist of approximately 45,000 units: all the enterprises larger than 10 employees and a sample of smallest enterprises
Information and Communication (section J);
Architectural and engineering activities; technical testing and analysis (division 71);
Research and experimental development on natural sciences and engineering (group 72.1);
Advertising (group 73.1);
Specialised design activities (group 74.1);
Services to buildings and landscape activities (division 81);
Other professional, scientific and technical activities n.e.c., Office administrative and support activities, Business support services activities n.e.c. (74.9, 82.1, 82.9).
Wiesbaden, October 2007

9. SECTOR STUDIES (I) Main source of the complex strategy
20th International Roundtable on Business Survey Frames
– Wiesbaden Group on Business Registers
SECTOR STUDIES (I)
Main source of the complex strategy
Previous tests with reliable results
First level in the hierarchical preference order of the sources
Features of the source
Managed by Tax Authority for fiscal purposes
Enterprises with a turnover of maximum 5,164,569 EUR (SME)
Coverage: around 70% of Italian Business Register
200 questionnaires grouped in four branches
manufacturing: 51 studies
services: 58 studies
trade: 69 studies
professional activities: 22 studies
Wiesbaden, October 2007

10. SECTOR STUDIES (II) Main aim
20th International Roundtable on Business Survey Frames
– Wiesbaden Group on Business Registers
SECTOR STUDIES (II)
Main aim
Choose the NACE codes of an enterprise according to the new version of the classification (REV. 2) not considering the old code (REV. 1.1) already assigned to the enterprise
Basic idea
Create a set of rules to link different variables able to lead the coding attribution
Deterministic approach
Results
Codes with different degrees of detail from one to five digits
Questionnaires based on the NACE REV. 1.1 and this can limit the possibility to assign specific codes
Wiesbaden, October 2007

11. SECTOR STUDIES: DATA Information gathered
20th International Roundtable on Business Survey Frames
– Wiesbaden Group on Business Registers
SECTOR STUDIES: DATA
Information gathered
Typical features of enterprises:
employment
localisation
accounting values
Set of activity-oriented information:
organisation:
production and/or trade (sale without transformation) in terms of turnover (percent values)
type of customers (distributive channels) in terms of turnover (percent values)
inputs (raw materials)
outputs (kind of activities or products in terms of turnover)
production processes (production cycle phases)
material assets
The new methodology is based on the analyses of the
activity-oriented data
Wiesbaden, October 2007

12. ECONOMIC ACTIVITY Statements (introductory guidelines of NACE REV. 2)
20th International Roundtable on Business Survey Frames
– Wiesbaden Group on Business Registers
ECONOMIC ACTIVITY
Statements (introductory guidelines of NACE REV. 2)
an economic activity takes place when resources such as capital goods, labour, manufacturing techniques or intermediary products are combined to produce specific goods or services; thus, an economic activity is characterised by an input of resources, a production process and an output of products (goods or services);
the principal activity of a statistical unit is the activity which contributes most to the total value added of that unit;
the principal activity is identified according to the top-down method and does not necessarily account for 50% or more of the unit’s total value added.
CONSISTENT
Coding activity based on
inputs, processes and
outputs data analyses
Turnover as a proxy
CONSISTENT
but based on turnover
Wiesbaden, October 2007

13. SECTOR STUDIES: CRITERIA
20th International Roundtable on Business Survey Frames
– Wiesbaden Group on Business Registers
SECTOR STUDIES: CRITERIA
Output
Main criterion in the business coding
Each output (kind of activities or products) is linked to a percentage of the turnover; at the end of the process each Nace code REV. 2 is related to turnover percentages
Input
Necessary when a product is into more codes in accordance with the raw material used (for example, “parts of footwear”)
Processes
Necessary when a specific production phase is strictly linked to a single economic activity (for example, “finishing of textile”)
Markets/distributive channels
Fundamental in the manufacturing and trade branches:
to distinguish retail or wholesale trade
to single out specific forms of trade (for example, agents involved in the sale; retail sale via mail order houses or via Internet)
Employment skills
For example, renting of construction machinery and equipment with or without operator
Wiesbaden, October 2007

14. COHERENCE WITH THE CORRESPONDENCE TABLES
20th International Roundtable on Business Survey Frames
– Wiesbaden Group on Business Registers
COHERENCE WITH THE CORRESPONDENCE TABLES
Changes
A certain number of enterprises, with a percentage varying in accordance with the sector under examination, is recorded with a NACE REV.2 code different from what expected by the correspondence tables
Break
The change of the source determined a break in the time series of NACE codes distribution but Business Register improved in quality because the answers about each attribute of the economic activity definition allowed a more effective codification process
Wiesbaden, October 2007

15. MANUFACTURING ACTIVITIES: COHERENCE WITH THE CORRESPONDENCE TABLES
20th International Roundtable on Business Survey Frames
– Wiesbaden Group on Business Registers
MANUFACTURING ACTIVITIES: COHERENCE WITH THE CORRESPONDENCE TABLES
MANUFACTURING* ACTIVITIES
Record %
Enterprises with a class level NACE code Rev. 2 assigned by the
procedure
211,128
  -
Enterprises with a class NACE code Rev. 2 linked to a class NACE Code
Rev. 1.1 by the correspondence tables
167,971
79.6%
Enterprises with a group NACE code Rev. 2 linked to a group NACE Code
178,952
84.8%
* with the exceptions of NACE Rev. 1.1 divisions: 27, 28, 29
RESULTS
The lowest rate: less than 80%
15% of enterprises in the same section
4% of enterprises in the trade section
Wiesbaden, October 2007

16. CONSTRUCTION ACTIVITIES: COHERENCE WITH THE CORRESPONDENCE TABLES
20th International Roundtable on Business Survey Frames
– Wiesbaden Group on Business Registers
CONSTRUCTION ACTIVITIES: COHERENCE WITH THE CORRESPONDENCE TABLES
CONSTRUCTION ACTIVITIES
Record %
Enterprises with a class level NACE code Rev. 2 assigned by the
procedure
384,097
  -
Enterprises with a class NACE code Rev. 2 linked to a class NACE Code
Rev. 1.1 by the correspondence tables
313,104
81.6%
Enterprises with a group NACE code Rev. 2 linked to a group NACE Code
337,847
88.0%
RESULTS
Main characteristic: re-allocate the business inside the section
All the enterprises with the codes not coherent with the correspondence tables are inside the same section but in different division
Wiesbaden, October 2007

17. TRADE ACTIVITIES: COHERENCE WITH THE CORRESPONDENCE TABLES
20th International Roundtable on Business Survey Frames
– Wiesbaden Group on Business Registers
TRADE ACTIVITIES: COHERENCE WITH THE CORRESPONDENCE TABLES
TRADE ACTIVITIES*
Record %
Enterprises with a class level NACE code Rev. 2 assigned by the
procedure
471,781
  -
Enterprises with a class NACE code Rev. 2 linked to a class NACE Code
Rev. 1.1 by the correspondence tables
428,182
90.8%
Enterprises with a group NACE code Rev. 2 linked to a group NACE Code
94.0%
* (95% of questionnaires)
RESULTS
The highest rate: 91%
Residual parts due to a re-distribution inside the section (wholesale became retail or vice versa)
Wiesbaden, October 2007

18. QUESTIONNAIRES DIFFERENT SITUATIONS
20th International Roundtable on Business Survey Frames
– Wiesbaden Group on Business Registers
QUESTIONNAIRES
DIFFERENT SITUATIONS
Every questionnaire is different from each other
The new methodology reached a range of results according
to different data available
Three examples:
Questionnaires in which NACE REV. 1.1 codes split into more NACE REV. 2 codes (so called 1 : N recoding)
Re-coding in more specific NACE REV. 2 code
Questionnaires with preliminary choices about the rules to apply
Wiesbaden, October 2007

19. 20th International Roundtable on Business Survey Frames
– Wiesbaden Group on Business Registers
EXAMPLE A
1 : N recoding
Sector Studies help the coding activity by exploiting all the information gathered from the source
Best situation
Example: manufacture of footwear
The manufacture of footwear activity splits into more NACE REV. 2 codes
Correspondence table
REV 1.1
REV 1.1 description
REV 2
REV 2 description
19.30
Manufacture of footwear
15.20
16.29
Manufacture of other products of wood;
Manufacture of articles of cork, straw and plaiting
materials
22.19
Manufacture of other rubber products
22.29
Manufacture of other plastic products
Wiesbaden, October 2007

20. MANUFACTURING OF FOOTWEAR
20th International Roundtable on Business Survey Frames
– Wiesbaden Group on Business Registers
MANUFACTURING OF FOOTWEAR
Results
NACE REV. 2
CODE
NACE DESCRIPTION
FREQ %
15.20
Manufacture of footwear
7,338
89.2%
16.29
Manufacture of other products of wood 42
0.5%
22.19
Manufacture of other rubber products
254
3.1%
22.29
Manufacture of other plastic products
122
1.5%
32.50
Manufacture of medical and dental instruments and supply (orthopaedic shoes) 50
0.6%
Other
Trade or missing
425
5.2%
ALL
8,231
The Sector Study collects a range of information about raw materials: wood, rubber and plastic. The coding activity based on input analyses gives very reliable results.
About 6% of enterprises was recoded out from division 15 in accordance with the new rules of the classification and this important result was gained only with the availability of the new source
Wiesbaden, October 2007

21. EXAMPLE B More specific REV. 2 code
20th International Roundtable on Business Survey Frames
– Wiesbaden Group on Business Registers
EXAMPLE B
More specific REV. 2 code
The source guarantees a re-allocation of the enterprises inside the same business
Main advantage: to assign a more specific REV. 2 code compared to the generic starting code REV 1.1.
Example: manufacture of concrete
3 codes with a 1 : 1 recoding
Available information about the outputs determines a coding re-allocation inside the same business
Wiesbaden, October 2007

22. MANUFACTURING OF CONCRETE
20th International Roundtable on Business Survey Frames
– Wiesbaden Group on Business Registers
MANUFACTURING OF CONCRETE
Correspondence table
REV 1.1
REV 1.1 DESCRIPTION
REV 2
REV 2 DESCRIPTION
26.61
Manufacture of concrete products for
construction purposes
23.61
26.63
Manufacture of ready-mixed concrete
23.63
26.60
Manufacture of other articles of
concrete, plaster and cement
23.69
Results
NACE REV. 1.1
NACE REV. 2
26.61
26.63
26.60
ALL
23.61
479 6
398
883
23.63 97
626 41
764
23.69
155 16
265
436
23.6 63 27 80
170
Other 83 23 76
182
877
698
860
2,435
With the new approach only the 50% of the generic NACE REV. 1.1 class was coded in the generic REV. 2 class 23.69
Wiesbaden, October 2007

23. EXAMPLE C Rules to apply
20th International Roundtable on Business Survey Frames
– Wiesbaden Group on Business Registers
EXAMPLE C
Rules to apply
Preliminary choice about the rules to apply to lead the coding activity
Trade-off between:
the criterion of the most contribution in terms of turnover (best contribution option)
the possibility to consider the specific features of a business (a priori rules option)
Example: other amusement and recreation activities
The Nace REV. 2 code “Other amusement and recreation activities” includes the activities of beaches
Specific category (five digits) in the Italian version
Wiesbaden, October 2007

24. ACTIVITY OF BEACH SERVICES
20th International Roundtable on Business Survey Frames
– Wiesbaden Group on Business Registers
ACTIVITY OF BEACH SERVICES
Results
NACE REV. 2
CODE
NACE REV. 2 DESCRIPTION
FREQ %
56.10
Restaurants and mobile food service activities
396
7.7%
56.30
Beverage serving activities
1,381
26.8%
77.21
Renting and leasing of recreational and sports goods 11
0.2% 93
Sports activities and amusement and recreation activities 28
0.5%
93.11
Operation of sports facilities 8
93.29
Other amusement and recreation activities
3,325
64.6%
ALL
5,149
Methodology tout court: a third of the enterprises recoded in other sections of the NACE Nomenclature
A priori rules option: bars, restaurants and all the other activities exist only in relation with the activity of beach services
Wiesbaden, October 2007

25. IMPACT EVALUATION Trade-off
20th International Roundtable on Business Survey Frames
– Wiesbaden Group on Business Registers
IMPACT EVALUATION
Trade-off
A priori rules
option
max
Heterogeneity
Best
contribution
option
Break risks
max
A committee of experts from Classifications, Business Register, National Accounts, STS and SBS Units is involved in the analyses of the results of the two options to evaluate the impact and decide the best solution for Business Statistics
Wiesbaden, October 2007