A value chain statistical definition of construction and the performance of the sector

Abstract

Existing statistical analyses often fail to capture the true scope of the economic impact of the construction sector. They account for the construction of buildings, civil engineering, and construction specialized activities, as defined by Section F of the Statistical Classification of Economic Activities (or NACE) used in the European Community, but overlook related activities such as the manufacture of construction products and architectural and engineering services. This shortcoming is addressed and a wider definition of the construction sector is proposed that encompasses the whole value chain of the industry. Going beyond the ‘core’ construction sector section (Section F), activities from other NACE sectors that fully or principally depend upon or are functional to core construction activities are considered. These ‘non-core’ classes relate to ‘pre-production’ activities, such as the provision of intermediate goods and services; various ‘support’ activities and ‘post-production’ functions such as maintenance and management services. Equivalent broad definitions of the construction sector based on the North American Industry Classification System (NAICS) and the International Standard Industrial Classification (ISIC) are also developed to allow for optimum comparisons across countries and over time. Using detailed data from Finland and the Community Innovation Survey 4 (CIS4), core and non-core activities are characterized and quantified. Evidence suggests that indicators measuring the composition, structure, value added, skills, and R&D input and output of the construction sector change substantially when a broader definition of the sector is applied. Policies targeting the ‘wide’ construction sector, and exploiting the innovation, growth and productivity leverage potential of non-core activities are thus advocated.

Keywords:

• Construction sector
• NACE classification
• value chain
• pre-production
• post-production

Acknowledgements

Many thanks go to Heli Koukkari and Matti Kokkala for sharing their construction expertise with us, and to Colin Webb for helping us improve our paper. We also thank Charles-Henri Dimaria, Michael Polder, and Kristina Nyström for commenting on previous versions of this work, as well as Will Hughes and three anonymous referees for their very helpful suggestions. The financial support of FNR, the National Research Fund of Luxembourg, is gratefully acknowledged. All remaining errors are ours.

The opinions expressed in this article are those of the author and do not necessarily reflect the official views of the Organisation for Economic Co-operation and Development (OECD) or of the governments of its member countries.

Notes

1. The acronym NACE stands for ‘Nomenclature générale des Activités économiques dans les Communautés Européennes’, i.e. statistical classification of economic activities in the European Communities. See the Statistics section of Eurostat: epp.eurostat.ec.europa.eu/portal/page/portal/eurostat/home.

2. See the metadata provided by Eurostat at ec.europa.eu/eurostat (accessed 10 February 2009).