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Third International Conference on Establishment Surveys Introductory Overview Lecture


Definitions and Units Andreas Lindner OECD Statistics Directorate Third International Conference on Establishment Surveys Introductory Overview Lecture – PowerPoint PPT presentation

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Title: Third International Conference on Establishment Surveys Introductory Overview Lecture

Third International Conference on Establishment
Surveys Introductory Overview Lecture
  • Definitions and Units
  • Andreas Lindner
  • OECD Statistics Directorate

Content of the lecture
  • Importance of statistical units
  • National data collection systems and their
    integration into the international dimension
  • Different definitions of statistical units
  • OECD survey on SME business frames
  • Compilation strategies and links to
    administrative sources
  • The impact of globalisation
  • Linking systems together
  • Multinational enterprises (MNEs) and Enterprise
    Groups (EGs)- a new statistical unit
  • Outlook

Are statistical units important?
  • The definition of units is the backbone of
  • They largely determine whether or not economic
    and social reality is correctly reflected in
  • Together with the business register design they
    allow (or prohibit) to correctly measure
    production, the flow of goods, services and
    capital, employment, financial data, ownership,
    control etc.
  • A coherent system of interrelated standardised
    statistical units is key for effectively
    combining data from different surveys and, hence,
    capturing the full array of economic activities
  • Coherence with and integration of the
    international dimension is required since it
    reflects the way businesses operate
  • Statistical units are very important!

Units constitute systems
  • Administrative legal system
  • Economic system
  • Statistical system
  • Global, international system
  • Are these systems in tune with each other ?

National systems
  • Great variety of units and definitions exist,
    because they have to fit the national set of
  • The statistical unit(s) are the translation of
    the legal and administrative set of conditions
    into an as much as possible standardized
    statistical representation of the society
  • Ideally, they should allow consistent linking
    across data collections, representing a data
    warehouse and not isolated stovepipes
  • Countries largely differ in their ability to do

should allow to bridge to the international
  • Any economy is today more than ever integrated in
    an international world economy with complex
  • For statistical analysis, this requires to have
    standardized concepts and definitions across
    countries, allowing to compare the comparable
  • This represents a permanent challenge to
    statisticians and International Organisations are
    called upon to facilitate this process by issuing
    international recommendations and measurement

An OECD survey on SBS/SME statistics identified
the following statistical key policy
  • Promote international convergence of statistical
    concepts and processes
  • Foster greater international comparability of
  • Promote development of an integrated business
    statistical register
  • Promote data linking to make better use of
    existing data and reduce respondent burden on
  • Carry out policy-relevant empirical analyses to
    underpin evidence-based policy making

A mix of definitions of SMEs
  • Legal statistical definition(5 countries)
  • Most EU countries differentiate legal from
    statistical purposes (see box 1)
  • Statistical definition generally based on number
    of employees or mix (e.g. persons and turnover
  • Different thresholds and sector-specific

Legal/administrative vs. statistical definition
of SMEs in the EU
Rich variety of statistical units
  • General impression the same name does not
    necessarily mean the same thing in another
    country. True? Evidence suggests that this is the
  • Is the enterprise vs. establishment split
    meaningful? Why not calling it economic
    statistical unit?
  • Despite Council Regulations, the situation in the
    EU seems less harmonized than one might assume

Council Regulation 696/93 8 different
statistical units (legal, geographical, activity
  • the Enterprise
  • the Institutional Unit
  • the Enterprise Group
  • the Kind-of-activity Unit (KAU)
  • the Unit of Homogeneous Production (UHP)
  • the Local Unit
  • the Local Kind-of-Activity Unit (local KAU)
  • the Local Unit of Homogeneous Production (local

UN classification ISIC
  • the enterprise
  • enterprise group
  • kind-of-activity unit (KAU)
  • local unit
  • establishment
  • homogeneous unit of production.

The Canadian statistical structure
  • Enterprise the highest level of the hierarchy
    with complete financial statements and
    information about international links. An
    enterprise may have one or more companies
  • Company A somewhat homogeneous production
    structure with balance sheets data. May have one
    or more establishments.
  • Establishment The most homogeneous production
    level with economic key data(output, inputs,
    wages). May have one or more location.
  • Location A unique physical production unit.

A wealth of statistical units
  • The EU focus on enterprise can be considered as
    a compromise taken in 1993 to accommodate very
    different national practices
  • The system of international standardisation is
    incoherent with respect to statistical units
  • EU terms need to be translated into world-wide
  • The legal dimension needs to be distinguished
    from the economic dimension
  • The economic dimension is likely to become more

OECD survey business frames used for SME
  • Half of countries reported use of combination of
    different sources, sometimes according to sectors
    and/or size classes
  • Agriculture often the exception to the rule (agr.
    from statistical source)
  • Very different thresholds across countries

Effects of different thresholds on coverage
four EU countries in comparison to the Italian BR
Identified limitations of Business Frames for SBS
  • Different updating intervals limit comprehensive
  • A specific SME frame is the exception
  • Confidentiality issues limit availability of data
    for other users/producers
  • General concern about quality and coverage of
    demographic data, in particular for deaths
  • Difficulties were reported as to the proper
    allocation of activities to industries
  • The quality of the Business Frame was generally
    considered as appropriate, although improvements
    are foreseen in many countries with respect to
    SMEs, change of activity, legal status etc.

The traceability issue
  • Ability to trace change through a unique
    identifier code for the local unit/establishment
    would allow to better capture unit activity and
  • Similarly, the introduction of links between
    legal units in enterprise groups and groups of
    companies would enhance identification of changes
    in size, ownership and location for units
    involved in events such as mergers and splits

Collection and compilation strategies
  • Germany and the US are the only countries in the
    sample under review where the NSO is not in
    charge of official statistics on SMEs.
  • Almost all countries have different treatment for
    core and specific statistics
  • Some countries have developed tools to monitor
    the response burden. The strategy developed is
    therefore to collect core variables through the
    integration of census/surveys based data and
    administrative data

Collection and compilation strategies (2)
  • In the majority of countries the NSO is fully in
    charge of data collection
  • In the remaining countries, the NSO plays an
    important coordinating role (Germany is the
    exception where the NSO has outsourced SME data
  • In the majority of countries, SME core statistics
    are differentiated from specific SME variables.
    The typical pattern is a reduced sample for core
    data as opposed to often voluntary thematic

Data linkage with administrative sources
  • Very different access patterns for NSOs to
    individual records could be identified, ranging
    from full to no access.
  • Where access to administrative and other sources
    is partial, differences in the definition of
    variables have been commonly seen as a major
    impediment to the use of administrative sources,
    different observation units, classification and
    the absence of a unique identification number
    have also been mentioned.
  • Sometimes technical problems hinder access to
    administrative sources. Countries generally have
    identified the main sources they would like to

Access and linkage with administrative sources
  • The picture regarding access of NSOs to
    administrative SME data is mixed. Country
    practice differs ranging from full access via
    partial access to no access
  • Although about 2/3 of responding countries state
    that NSOs have full access, half of them reported
    problems in uses or little practical experiences
  • Five countries reported only partial access
  • Japan and Switzerland reported that no access
    was granted to NSOs

Access and linkage with administrative sources (2)
  • In the case of access, but no usage, the main
    reason were different basic units and absence of
    links between registers and administrative data
  • Similarly, the main impediments to a better use
    of available data in the two distinct sources
  • Different definitions of variables
  • No common identifier
  • Different classifications and thresholds

The impact of globalisation on statistical
  • One of the most visible manifestations of a more
    globalised world is trade. The remarkable growth
    of trade flows is undisputable, in particular for
    emerging major players (see next slide)
  • But, as can be seen from the remarks later under
    Linking systems together, even trade and
    business statistics are rather separate entities
    needing reconciliation/standardisation

Relative growth of exports of goods Growth over
the period 1996-2005, OECD total 1
The impact of globalisation on statistical
units/definitions (contd)
  • The real problem is that statistical systems have
    been overtaken by the speed of globalisation
    obliging national reporting systems and
    structures to align to this paradigm shift
  • In other words, national concepts need to
    incorporate the international dimension to
    adequately reflect the reality of todays
    production process

Statistical units/definitions more or less in tune
  • Administrative legal system
  • Statistical System Economic System

went out of tune
  • Administrative legal system
  • Statistical System Economic System

As a consequence, both Administrative legal and
Statistical System
  • Need to adapt to (better integrate) the new
  • where the production process is international,
  • with more complex structures/processes exist
    (outsourcing, flatter vertical integration)
  • and where control and ownership become more
    dominant features than legal forms

Linking systems together business statistics and
  • Global economies require data on who is trading
    and what are the characteristics of trade
  • This question requires establishing a direct
    relation between foreign trade and industrial
  • But these two statistical domains are based upon
    different concepts (products versus economic
    activities) and use different classifications
    (SITC, HS, ISIC, CPC).

Linking systems together business statistics and
  • Central issue of such an analysis is to try to
    classify trade operators according to enterprise
  • But this depends on the possibility of using or
    developing common identifiers between the trade
    register and the business register
  • Countries largely differ in their ability to
    perform such a linking.

The present situation
  • The situation in Non-EU countries of OECD can
    be summarized as follows
  • Six out of eight countries reported having a
    trade register, only 1 country reported having a
    formal trade register
  • How is the trade register updated? Customs
    declarations provide the basis. In half of the
    responses there is a link to the Business
    Register and data from fiscal authorities is used
    as well

The present situation (contd)
  • Which is/are the unit(s) of reference in the
    trade register(s)? Enterprises and establishments
    constitute together with legal units the
    reference units used.
  • Is there at least one common unit of reference
    between the business register and customs
    forms/register? All countries, except one,
    reported yes.
  • Is (or can) the basic statistical unit of the
    business register linked to customs forms/
    register of traders? Almost all countries
    reported that they can link the basic
    statistical unit to customs forms/trade registers

The present situation (contd)
  • The situation reported was a mix of different
    identification means, such as the tax
    registration number, name of the company and its
    address, the Business Register identification
  • Although linkages do well exist, different
    reporting systems in countries inhibit to some
    extend linking.
  • The risk of double-counting was acknowledged and
    the problematic measurement of multi-nationals
    was highlighted.

The present situation (contd)
  • Have Non-EU countries of OECD carried out any
    statistical matching exercise between the trade
    register and the business register?
  • Only three countries reported to have done so
  • The more systematic integration of the
    international dimension into business frames
    seems to be rather the exception than the rule
  • This could be pursued as a development goal at
    international level together with countries

Multinational enterprises (MNEs) and Enterprise
Groups (EGs)
  • Beyond the national territory, a statistical
    system needs to take into account more
    systematically the international dimension
  • Foreign Direct Investment
  • Foreign Affiliates Statistics
  • Enterprise Groups, in particular Multinational
    Enterprises as new statistical unit

FDI Flows and Stocks
  • Foreign direct investment (FDI) is a key element
    in the rapidly evolving process of international
    economic integration. FDI creates direct, stable
    and long-lasting links between economies. FDI
    encourages the transfer of technology and
    know-how between countries, and it allows the
    host economy to promote its products more widely
    in international markets

  • Foreign direct investment (FDI) is defined as
    investment by a resident entity in one economy
    with the objective of obtaining a lasting
    interest in an enterprise resident in another
  • The lasting interest means the existence of a
    long-term relationship between the direct
    investor and the enterprise and a significant
    degree of influence by the direct investor on the
    management of the direct investment enterprise.
    Absolute control by the foreign investor is not
    required, and ownership of 10 of the voting
    power is the criterion used.
  • Inward stocks are the direct investments held by
    non-residents outward stocks are the investments
    held in other economies.

FDI global trends
  • The global environment for FDI improved in 2005
    while at the same time corporate profitability
    was generally strong.
  • Direct investment into OECD picked up in 2005
    when inflows reached 622 bn.
  • The United States and the United Kingdom were
    the main destinations for FDI in the OECD.
  • Investment flows to EU countries also increased
    notably by 75 while half of the increase
    accounts for FDI flows into the United Kingdom,
    which tripled in 2005.
  • Investments into China, amongst the foremost
    destinations of FDI, further progressed.
  • The OECD area continued to be net outward
    investor at around 95 bn in 2005

Why Foreign Affiliates?
  • Since the mid-1980s and with the quickening pace
    of globalisation of the economy, foreign direct
    investment has become central to worldwide
    industrial restructuring and one of the most
    dynamic elements of international transactions
  • The need to assess the role and impact of direct
    investment, not only in financial terms but also
    in the context of its impact on jobs, sales and
    trade, has underlined the importance of having
    data indicative of the industrial activity of
    multinational firms
  • To meet these new needs in analyzing the
    globalisation process, the OECD launched the
    regular collection of data on the performance of
    foreign affiliates in the manufacturing sectors
    of the OECD countries

Foreign Affiliates
  • OECD Definition An affiliate under foreign
    control is defined as one in which
  • A single foreign investor holds more than 50 of
    the shares with voting rights.
  • The notion of control allows all of a companys
    activities to be attributed to the controlling
  • This means that variables such as a companys
    turnover, staff or exports are all attributed to
    the controlling investor and the country from
    which he or she comes. Control may be direct or

Foreign Affiliates economic activity is
significant in OECD countries Employment in
manufacturing and services in affiliates under
foreign control (as of total employment, 2004
or latest available year)

A new statistical unit is needed the Enterprise
Group (EG)
  • EU definition
  • An enterprise group is an association of
    enterprises bound together by legal and/or
    financial links. A group of enterprises can have
    more than one decision-making centre, especially
    for policy on production, sales and profit. It
    may centralize certain aspects of financial
    management and taxation.
  • It constitutes an economic entity which is
    empowered to make choices, particularly
    concerning the units which it comprises.
  • EUROSTAT is actively working on the EG Register

EGs and EG-sub-groups a scenario based upon real
  • The economic picture of a country crucially
    depends on the degree of inclusion or exclusion
    of statistical units
  • France has launched in 2005 a major high-level
    project of re-designing its enterprise statistics
  • This project was carried out by the CNIS, the
    National Council for Statistical Information
  • In April 2007, the final report was presented

EGs and EG-sub-groups a scenario based upon real
  • Some conclusions
  • INSEE, the French NSO, will use this report for
    defining procedures to incorporate enterprise
    groups in the collection system of economic
  • An affiliate is no longer considered as an
    equivalent ot an enterprise unit
  • An affiliate can not be considered as enterprise
    (lack of autonomy)
  • A MNE has to be considered globally (an MNE and
    its branches think and define themselves
  • Many economic actors consider the EG (or
    sub-group of it) as the relevant unit of analysis
  • Users want to analyse market realities, not
    hierarchical structures within EGs

EGs and EG-sub-groups a scenario based upon real
  • The CNIS recommends the addition of a Global
    Statistical Unit (GSU) for EGs
  • It is at this level where the strategic direction
    and decisions on affiliates are taken (mergers,
    acquisitions, investment, relocations etc,)
  • This GSU is independent of national frontiers
  • This logic of definition leads to a statistical
    representation of the national economy as the sum
    of all French GSUs world-wide

EGs and EG-sub-groups a scenario based upon real
  • This approach is innovative in macro economic
    statistics since it goes systematically beyond
    the national territory (to our knowledge, only
    the BEA in the US has a similar approach)
  • Most traditional economic statistics take the
    national approach in terms of national territory

Simulation done by the CNIS in France
  • France World

(A)Foreign- controlled Companies 2 M
(B)Legally Independant Companies 6,3 M
(C)French Groups 2,1 M
(D) International French Groups Df 4,2 M
Dw 3,6 M
Simulation done by the CNIS in France
  • Truncated Global Statistical Unit(GSU)
  • ABCDf 14,6 million salaried employees
  • French truncated GSU
  • BCDf 12,6 million salaried employees

Simulation done by the CNIS in France
  • World-wide French GSU
  • B C Df Dw 16,2 million salaried empl.
  • A world-wide French measurement, including the
    activities abroad from French EGs would yield
    16,2 million employees, compared to 14,6 million
    in the territorial view a plus of 1,6

  • This lecture has tried to shed some more light
    on the need to move towards a better integration
    of the international dimension into national
    statistical reporting
  • Much need to be done and this includes the

Updating the SNA
  • to allow a better measure and integration of the
    increasingly global nature of economic
    transactions and arrangements. Particular
    attention should be paid to
  • Goods for processing the gross or net treatment
    would fundamentally affect the nature and size of
    trade in goods and services (goods or services)
  • Government-owned foreign subsidiaries recognize
    both the parent and the subsidiary as
    statistical unit
  • Better measuring cross-border service flows

International production processes necessitate a
fresh look at international trading and
  • More an better data needed on re-exports
  • More and better data needed on further processing
    and merchanting
  • FATS gt inward FATS alongside SBS needed, idem
    for a reduced set of outward FATS data (more
  • MNEs gt consistent definition of EGs needed and
    integration into registers
  • Profiling of domestic operations needed
  • Difficulty consolidation/deconsolidation of
    financial results of EGs

A preliminary conclusion
  • Along with more consistent national data, greater
    international consistency with respect to
    concepts and definitions of statistical units is
    necessary, namely the addition of
  • The enterprise group as unit of analysis
  • which is relevant for the analysis of MNEs
  • and which should be recognized and recommended
    in SNA as one statistical unit
  • ... and should be integrated in national data
    collection systems

Thank you for your attention!
  • Questions? gt