INTRODUCTION
An Industry is a group of establishments engaged in the same or similar types of economic activity. Industries produce and sell Commodities (products and services) to other Industries for their use as inputs and to Institutions as final use.
In the Canadian Provincial Product, Industries are organized into three broad sectors of the economy: (1) the business sector, (2) the non-profit institution serving households (NPISH) sector, and (3) the government sector. This article defines these sectors, describes the differences between them, and highlights distinctions between IMPLAN’s core U.S.-based Product and the Canada Provincial Product.
BROAD INDUSTRY CLASSIFICATIONS
BUSINESS
In the Canada Provincial Product, the Business Sector reflects the activities of entities that produce goods and services for the market at economically significant prices and derive most of their income from market production. This includes private Industry activities and activities of Government Business Enterprises (GBE), or government-owned and operated entities that operate like private enterprises. Industries within the business sector are disaggregated according to the North American Industrial Classification System (NAICS), which groups establishments into Industries on the basis of their production processes. GBEs are classified as part of their representative business sector Industry. For example, GBEs operate in many Industries, such as electrical utilities, postal services, and public transit, among others. Government Business Enterprise activities will therefore be included in those business sector Industries. As business sector Industries account for most Industries within the Canadian economy, these Industries have no special designation in the Industry description.
NPISH
The NPISH sector reflects activities by non-profit institutions and is similarly disaggregated by NAICS Industry. NPISH sectors produce non-market goods and services that are supplied either for free, or at economically non-significant prices. Examples of NPISH include organisations that provide community food services, community housing, emergency relief, religious organisations, advocacy, and sports and recreation. NPISH Industries are denoted by ‘NP’ in the Industry description.
GOVERNMENT
The Government Sector reflects the activities of Government Institutions (as distinct from Government Business Enterprises), as well as government non-profit institutions, such as hospitals, universities, and colleges. Like NPISH sectors, government sectors produce non-market goods and services that are supplied either for free, or at economically non-significant prices. Government sector Industries are not disaggregated by NAICS Industry, but instead by broad function, such as education, health, and administrative services like defence and law enforcement services. Government Industries are denoted by ‘GS’ in the Industry description.
DEFINING CHARACTERISTICS OF NPISH AND GOVERNMENT SECTORS
There are several unique characteristics of the NPISH and Government sectors that warrant additional explanation. First and foremost, NPISH and Government sectors largely produce non-market Output. As such, NPISH and Government sectors provide goods and services to other Institutions (primarily Households) or to the broader community either for free or at economically non-significant prices. Due to this, the value of Industry Output cannot be measured by sales. In these cases, Output is instead measured by production cost. Production costs included Intermediate Inputs (II), Employee Compensation (EC), Other Taxes on Production net of Subsidies (OTXS), and consumption of fixed capital, represented by Gross Operating Surplus (GOS).
Second, while NPISH and Government sectors produce Output for sale as Intermediate Inputs and final consumption, Households are the only Institution that actually consume the goods and services generated by these sectors. However, the avenues through which Households consume these goods and services can vary, depending on which Institution is making the expenditure on behalf of the Household. For example, Households can purchase goods and services on their own, which is reflected in their personal consumption expenditure. Alternatively, NPISH and Government can purchase goods and services on the behalf of Households. These are reflected in the final consumption expenditures of the NPISH and Government, respectively. Notably, the NPISH final consumption expenditure only includes purchases of goods and services from NPISH sectors and the Government final consumption expenditure only includes purchases of goods and services from Government sectors.
Finally, it is worth noting that all NPISH are non-profit institutions (NPIs), but not all NPIs are NPISH. NPIs are legal entities that produce goods or services and whose status does not permit them to earn profit and distribute that profit to their owners. NPIs can either be characterized as market NPIs or non-market NPIs. Market NPIs may charge economically significant prices for their services and are allocated to business sector Industries. This includes organisations such as Chambers of Commerce, trade associations, business lobby groups, and others. Non-market NPIs provide goods and services for free or at economically non-significant prices. When non-market NPIs are heavily influenced (controlled or financed) by governments, such as some schools, colleges, universities, and hospitals, these non-market NPIs are generally classified to the government sector. Finally, there are NPIs that provide goods and services for free or at economically non-significant prices, but that are not heavily influenced by the government, and these are allocated to the NPISH sector. The NPISH sector includes professional associations, trade unions, political parties, churches and cultural, recreational, and sport clubs as well charities such as the Red Cross.
COMPARISON TO CORE U.S. DATA
There are several notable differences between the Canada Provincial Product and the core U.S.-based Product. This section of the article highlights those differences.
INDUSTRIES
In U.S.-based Products, NPISH is not reported separately and neither NPISH nor Government Institutions are given Industry designations. In the Canada Provincial Product, both NPISH and Government Institutions are provided Industry designations. NPISH Industries are denoted by ‘NP’ and Government Institutions are denoted by ‘GS’.
COMMODITY PRODUCTION
In U.S.-based Products, Industries can produce more than one commodity. In Canada Provincial Products, Industries only produce their primary Commodity. In other words, they do not produce byproducts. In both the U.S. and Canada Provincial Products, Commodities are numbered in accordance with the primary Industry that produces them, with the Commodity number equal to the Industry number plus 3000 (e.g., Industry 1 produces Commodity 3001).
GOVERNMENT INSTITUTIONS (ADMINISTRATIVE GOVERNMENT)
As mentioned previously, in U.S.-based Products, Government Institutions do not have full1 Industry designations. However, in the U.S.-based Products Government Institutions are represented partially through several special payroll sectors that account for the Employee Compensation and Value Added associated with employment in Government Institutions. These special payroll sectors are denoted with an asterisk (*). In U.S.-based Products, Commodity purchases of Administrative Government Institutions are considered Final Demand (not Intermediate Inputs) and are reflected by Institutional Spending Patterns (that can be modeled using an Institutional Spending Pattern Event). Read more about this in Government Basics: Understanding Sales, Revenues, and Expenditures.
In the Canada Provincial Product, Government Institutions do have a full Industry designation (GS sectors). As such, the consumption purchases of Government Institutions are reflected in the Industry Spending pattern for GS sectors. This is reflective of the operational expenses Government Institutions must incur to produce the goods and services that they produce.
GOVERNMENT ENTERPRISES
In U.S.-based Products, Government Enterprises are reflected as separate Industries, such that there is no Industry that is a mix of privately-owned and government-owned. The consumption purchases of Government Enterprises are reflected in the Industry Spending Pattern for those unique Government Enterprise Industries. In contrast, in the Canada Provincial Products, the activity of Government Enterprises (despite being owned and operated by the government) are included in their relevant business sector Industry.
RELATED ARTICLES
1Government Institutions in the U.S.-based SAM do not have “full” industry designations in that they do not have a full production function, comprised of Intermediate Inputs and Value Added.
Written January 8, 2025