The role of industrial classification in the micro‐macro integration: The case of the banking business in the 1997 North American industrial classification system

Abstract

Although economic classification is not part of the Ruggles's prodigious contributions to the System of National Accounts, it is certainly meant to help achieve the integration and linking of macrodata with microdata. Unfortunately, economic classification is a component of the statistical infrastructure that often remains unquestioned by the existing industrial organization literature. This paper fills this gap using the banking business under the 1997 North American Industry Classification System (NAICS) as an example. More specifically, the paper ascertains the extent to which NAICS succeeds at combining the various activities performed by Canadian banks into homogeneous industries. Assuming that producing units within the same industry should display more similar cost structure than those in less similar industries, we find that NAICS—at least for the banking sector—is successful at identifying and grouping producing units into homogeneous economic activities. This result is particularly helpful for empirical research that relies on microdata to draw inferences on the structures, conduct and economic performance of the banking sector as whole.