A Note on the Use-Classification of Four Digit Industries or How to Call a Spade a Spade

Gordon C. Winston, Arthur Macewan

Abstract


Much of our understanding of structural change with
industrialization is based on empirical studies that describe patterns
in the relationship between consumption, intermediate and capital goods
[1; 2, for instance]. Thus, classification of an industry's output,
prices, imports or exports by use is of primary importance. Even if the
data available describe individual products, there is some ambiguity in
use classification—safety razor blades (metal products) are clearly
con¬sumption goods but sewing machines (nonelectric machinery) are
consumption goods if owned by housewives and capital goods if owned by
tailors. Far more serious problems, however, arise when large industry
sectors, like whole four digit industries, must be classified by use. If
there is no basis for dividing any industry's output (or prices or
imports or exports) among its alternative uses, then the entire industry
must be classified as a single lump in one of the three use categories
on the basis of some judgment— even if heroic—or else such aggrega¬tion
by use must be abandoned. But ad hoc classifications that lump entire
four-digit industries under one or another heading are not appropriate
if there exists a reasonable basis for dividing each industry's output
among uses. Then, instead of assigning all metal products to capital
goods (as did Chenery) it is possible to assign some portion to
consumption goods (representing razor blades, et al), some to
intermediate goods (rivets) and some to capital goods
(spades).

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DOI: https://doi.org/10.30541/v6i4pp.592-597

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