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Regulatory Impact Analysis
Regulatory Impact Analysis (RIA) is a policy tool widely used in OECD countries. RIA examines and measures the likely benefits, costs and effects of new or changed regulations. It provides decision-makers with valuable empirical data and a comprehensive framework which they can use to assess options and the consequences their decisions may have. RIA is used to define problems and to ensure that government action is justified and appropriate.
OECD Member countries have recognised that regulatory quality is crucial to economic performance and to improving the quality of life of their citizens. This led the OECD Council to establish, in March 1995, a Recommendation on Improving the Quality of Government Regulation – the first internationally accepted set of principles concerning regulatory quality. Among a range of system improvements, the Recommendation included a reference checklist for regulatory decision-making and a commitment to better RIA.
Attempts to improve regulatory quality initially focused on identifying problem areas, advocating specific reforms and scrapping burdensome regulations. But policy makers soon recognised that makeshift approaches to reform were insufficient. The reform agenda of OECD countries began to broaden, to include a range of explicit overarching policies, disciplines and tools. The OECD Guiding Principles for Regulatory Quality and Performance reflect the change over the last decade, capturing the dynamic, ongoing whole-of-government approach to implementation. RIA can be used to integrate competition and market openness criteria.
The OECD has assessed RIA systems through thematic studies and country reviews. The report Regulatory Impact Analysis – Best Practices in OECD Countries described RIA systems used in different Member states and their historical development, compared elements of those systems and their practical implementation, and identified current best practice in RIA. As a result, a set of ten good practices in the design and implementation of RIA systems was developed. This does not imply that a single system of the implementation of RIA is desirable in all countries at all times. Institutional, social, cultural and legal differences between countries require different system designs. The good practices are starting points to maximise the benefits of RIA.
Contact: For further information please contact pedro.andresamo@oecd.org or gregory.bounds@oced.org
More on the topic:
Alternatives to Regulation
The search for alternatives to regulation is a powerful tool to ensure the quality of regulation. This requires testing whether to regulate is the best appropriate option, and if regulation is chosen, how to achieve it with the least possible cost.
The OECD has emphasised the importance of a range of options when considering how to deal with a policy issue. The third question on the 1995 OECD checklist for regulatory decision-making is to consider whether regulation is the best form of government action. It is noted in the checklist that: ‘Regulators should carry out, early in the regulatory process, an informed comparison of a variety of regulatory and non-regulatory policy instruments, considering relevant issues such as costs, benefits, distributional effects and administrative requirements.’ The challenge is to ensure this occurs in practice.
In fact, the first response by governments to a perceived policy issue is often to regulate. But was this the best possible action the government could have taken? In many situations there may be a range of options other than traditional ‘command and control’ regulation available to achieve the government’s policy objectives. The ‘regulate first’ approach may mean that more effective and efficient policy instruments are being overlooked. This is an important issue because the use of an inferior policy instrument may have significant implications for competition, economic performance and may be less effective in meeting wider social objectives.
Documents:
Alternatives were initially discussed in the OECD report:“Regulatory Policies in OECD Countries: From Interventionism to Regulatory Governance" (2002), where Annex II has a discussion on the use of regulatory alternatives in OECD countries.
The OECD also prepared a report updating and extending the earlier work of the OECD on alternatives to traditional regulation, drawing on the experiences of individual countries in using alternative approaches.
The report also provides a framework to assist policy makers in selecting those instruments that are particularly applicable in different circumstances, facilitating the desire of many countries to reduce red tape and the burdens imposed on agents by unnecessary or overly prescriptive regulation.
Contact information:
For further information please contact Jennifer.stein@oecd.org
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