_Table 26_ **_. SOE taxonomy in arts, entertainment, and recreation_**

|**Arts, Entertainment, and recreation (R)**<br>_Distribution of disaggregated sectors by category_<br>Competitive<br>**Natural Monopoly**<br>**Partially Contestable**|
|---|
|7<br>0<br>0|
|100%<br>0%<br>0%|

Source: Authors’ elaboration

## P. Other Service Activities (S)

Other service activities include those performed by membership organizations, trade unions, and religious and political organizations, as well as the repair of personal goods and appliances and other personal services such as hairdressing, among others. Of the 19 sectors at the four-digit level in this industry, six are excluded from the taxonomy and 13 are classified as competitive (Table 27). The excluded sectors involve membership organizations, which generally do not provide services for profit and/or their purpose is not market production. As such, these sectors are excluded on the basis that any state-owned entities operating therein do not satisfy the paper’s definition of SOEs as entities engaged in production for the purposes of generating a profit. The remaining sectors are classified as competitive because they do not involve public goods and none of them exhibit entry barriers relating to cost structure. The classification for each disaggregated sector in this industry is provided in Appendix 2, Table A.16.

_Table 27_ **_. SOE taxonomy in other service activities_**

|_Distr_<br>**Competitive**|**Other Service Activities (S)**<br>_ibution of disaggregated sectors by category_<br>**Natural Monopoly**<br>**Partially Contestable**|
|---|---|
|13|0<br>0|
|100%|0%<br>0%|

Source: Authors’ elaboration

# V. Application: Empirical Exercise to Validate the Sector Taxonomy

An analysis of the average number of firms operating in each disaggregate sector was conducted using data published by Eurostat. In recent years, granular data on the number of firms has increasingly become available at a disaggregated sector level. Data on the number of firms at the level of NACE 4-digit sectors was obtained for 30 high-income countries and 5 upper middle-income countries in Europe using from Eurostat’s Structural Business Statistics (SBS). The data is compiled yearly by national statistical institutes based on information from statistical business registers, administrative sources, and surveys. SBS covers NACE Rev. 2 sections B to N and division 95, corresponding to 505 out of the 615 4-digit sectors in NACE Rev. 2. The analysis used the most recent data for 2019, cleaned to remove country sectors with missing information and country sectors with zero firms. In the latter case the sector has been presumed as nonexistent in a country, hence not relevant for the analysis.

The number of firms operating in disaggregated sectors is used to review and validate the proposed taxonomy. It is important to note that the number of firms proxy is imperfect because the number of firms observed in a sector does not automatically indicate whether a sector is competitive or not. This is due to two reasons. First, the number of firms in a sector may be high but composed of several markets (e.g., local markets) that are not competitive. Secondly, the observed number of firms can be different from 29