10. The Necessity of a New Industrial Classification Based on Value-Creation Behavior

In the mid-twentieth century, Fisher (1939) and Clark (1940) classified industry into primary, secondary, and tertiary production, which served as the basis of the International Standard Industrial Classification. However, some have criticized Fisher and Clark’s classification as too simple to account for the heterogeneity in tertiary production (i.e., the service industry). By using EU KLEMS and Organisation of Economic Co-operation and Development data, we suggest a new industrial classification based on value-creation behavior that helps explain economic development. In the new paradigm, industry is divided into value-creation sectors composed of base and extended value as well as transferred value industries comprised of production support service, private service, and public service components. The new industrial classification can inform an efficient industrial policy designed to accelerate economic growth.