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Dunlop, C.A. and Radaelli, C.M. (2016) 'The Politics and Economics of Impact Assessment', Dunlop, C.A. and Radaelli, M. (eds) International Handbook of Regulatory Impact Assessment, Edward Elgar.

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Dunlop, C.A. and Radaelli, C.M. (2016) 'The Politics and Economics of Impact Assessment', Dunlop, C.A. and Radaelli, M. (eds) International Handbook of Regulatory Impact Assessment, Edward Elgar.
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  1 Chapter 1. The Politics and Economics of Impact Assessment Claire A. Dunlop, University of Exeter, UK Claudio M. Radaelli, University of Exeter, UK  Introduction This  Elgar International Handboo of I!pa"t Assess!ent   aims to provide a  balanced account of what it is to design, make and implement impact assessment (IA) across a range of major policy sectors, countries and regions. In the volume, a field of international academic and practitioner eperts guide us through the state of the art of IA in five parts! i) the analytical approaches that underpin IA, ii) the pre"eminent tools, actors and dimensions, iii) major policy sectors where IA is featured, iv) the regional diffusion of IA, and v) its implementation analytically, pedagogically and in the field. This introduction fulfils the function of a scene"setting chapter. #e do not offer a systematic account of IA (assuming that is possible), nor is it a summary of thechapters that follow. $ather, we define what IA is and review what we know in the literature about the core dimensions of IA % its politics and economics.$egulatory impact assessment ($IA) or simply IA is a systematic and mandatory appraisal of how proposed primary and&or secondary legislation will affect certain categories of stakeholders and other dimensions. These 'other dimensions vary acrosscountries. They may include economic sectors, the economy as a whole, trade, gender,health, employment, income distribution, poverty, the environment and climate. or eample, in the *uropean +nion (*+) (see chapter -. of this volume), IA is eminently concerned with three dimensions! economic, social, and environmental.  2 ophistication and analytic breadth vary, as evidenced by /*01 indicators (/*01 --23 -45). Techni6ues such as cost"benefit analysis (07A) are prominent in some countries like the +A (see chapters 8. and 4. of this volume), and less prominent in different contets, like *urope.#e say 'systematic because we consider countries or sectors where IA is not usedas episodic or random fashion. '9andatory means that it is not a voluntary activity of regulators and government departments. *ssentially, IA is a type of administrative  procedure, often used in the pre"legislative scrutiny of legislation. IA can also be used to appraise the effects of proposed regulations on public administration (e.g., other departments, schools, hospitals, prisons, universities) and sub"national governments. Although IA is mostly deployed at the policy formulation stage (:ordan and Turnpenny -45), it can be used to eamine the effects of regulations that are currently in force, for eample with the aim of eliminating some burdensome features of eisting regulations or to choose the most effective way to simplify regulation.IA is not just a  produ"t   which documents economic analysis. It is also a  pro"ess . In fact, IAs also report information on how the problem was defined, who was consulted and with what effects, the range of feasible options, including the option of keeping the status 6uo, and the criteria employed to choose between an option and others. Thus, while economic analysis is the backbone of IA, there are other steps thatcannot be reduced to economic analysis. Analytical depth varies according to  jurisdictions and the regulatory issue analy;ed. In some countries IA is limited to the analysis of administrative burdens or compliance costs for business firms. #hen the appraisal is limited to regulations, governments prefer to use '$IA (like in the +A). #hen the objects are all policy proposals, regulatory or not, it is common practice to  3 talk about 'IA. In this volume we use IA to refer to both 'regulatory and non"regulatory proposals that are scrutini;ed with this tool.In this chapter, we review the literature on the economic and political dimensions of IA. These two disciplines have often operated one alongside the other, as shown by the rise of the field of 'political economy. /ther studies have reviewed the whole field of IA (Adelle et al. -4). <ere we divide the literature into four important areas! rationale, diffusion, economic effects, and utili;ation. The 'rationale is the logic that would lead elected politicians (think of a government or a =resident) to introduce IA. <ere is where political economy models of delegation dominate the scene, although empirically they may be more accurate for =residential systems like the + than for parliamentary systems.+nder 'diffusion we include studies on the adoption, implementation and more generally spatial interdependence (for more specifics see chapter 4>. of this volume dedicated to diffusion mechanisms). '*conomic effects covers studies that capture the causal relationship between regulatory analysis and final economic variables, such as productivity and growth. '+tili;ation is our general category to discuss political science studies on how governments use IA, and more generally the effects of IA on the political system % for eample the effects on the relationship  between elected politicians and bureaucracies. #e do not review studies on the economic accuracy of benefit"cost estimates and how individual regulatory analyses comply with governmental guidance (or other benchmarks such as /*01 and *uropean +nions instructions on impact assessment) because we have two chapters entirely dedicated to this topic (chapters ?. and @.).  4 7efore we proceed, a caveat is in order. #hen we talk about 'economic and  political effects we have to acknowledge that the causal relationships between IA andfinal outcomes are comple. Imagine we want to eplain a certain rate of growth (or, turning to political variables, a certain level of perceptions of fairness in the regulatory system) with the presence of IA in a given country. et us work back alongthe chain of causation, starting from a given economic outcome like growth or  productivity. The first element of the chain is that observed growth depends on how regulations are enforced and implemented % assuming all the other non"regulatory variables are the same.et us go backwards one more step. Bow we have to demonstrate that these economic effects of regulation depend on how the rules were designed % whilst in  practice the economic effect of a rule depends less on how it is designed than on how inspectors, courts, individual firms and pressure groups interact in regulatory enforcement and implementation. Bet in this backward"mapping eercise we must demonstrate the causal link between how rules are designed and $IA guidance. =ut differently, we must be sure that the regulations are designed in a certain way because of the presence of IA and not of other variables. In the end, the presence of an economic effect of IA (the same can be said for political effects) depends on a long chain of causation with mechanisms that may be interrupted or not eisting in one  point or the other (of the chain).These conceptual difficulties eplain why most of the literature has focused onlimited, selected points on the chain of causation, recogni;ing the empirical difficulties of estimating correctly the net effect of IA on final economic or political outcomes ($adaelli and 1e rancesco --@). The counterfactual is a daunting  5  problem for causal analysis (0oglianese --) because we do not know how to modelthe state of the economy had IA been absent in a given country. 1.The rationale: the logic of delegation The first fundamental step is to provide a theoretically justified reason for IA. =ut differently, the 6uestion is what is IA a case ofC In political economy, the answer is  provided by theories of delegation concerned with administrative procedures. These theories have been developed for =residential systems, notably the +A. In this country, 0ongress has delegated broad regulatory power to agencies. Agencies define the substance of this power in their rule"making activity over time. To control rule"making, the =resident can eercise oversight. This applies to ederal *ecutive Agencies whose IAs are submitted for analysis and review to the /ffice for Information and $egulatory Affairs (/I$A), a body operating within the /ffice for 9anagement and 7udget (/97). ince doctrine and practice acknowledge that the + eecutive is unitary, this =residential control on ederal *ecutive Agencies is legitimate % the thorny issue being whether /I$A eercises political control on the regulatory trajectory of the agencies (for eample, pro or de"regulation) or analytical control on the 6uality of benefit"cost estimates provided in the IAs (Dagan --4).et us now read this chain of delegation and control with a theoretical lens. 1elegation generates the problem of regulatory drift. /nce power has been delegated, information asymmetries work in favor of regulatory agencies. And yet, the principal can still control the regulators via administrative procedures duly enforced by 0ourts (9c0ubbins, Boll, and #eingast 42>2). Administrative procedure can force the agencies to release information to pressure groups (via consultation) and elected
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