2. Ex ante vs ex post approaches
• Ex ante simulation involves projecting the effects of a policy change
on a set of economic variables of interest
• Can answer “what if” questions
• Ex post approaches use historical data to conduct an analysis of the
effects of past policy
• Can answer “what if” questions if estimated parameters are used for
simulation (which assumes that past relations continue to be relevant)
3. Ex-ante impact assessment
Is an activity made at the beginning of the Public Policy formulating process.
The key-factor is represented by establishing of what has to be estimated or
evaluated.
Public policy ex-ante analysis represents the process of identification of problem or
objective, eventual options of problem solving or achievement of objective, and
analysis of the effects or consequences of these options pending decision.
The justification for ex ante evaluation is a desire to clarify the major questions that
will determine the terms of planning.
Ex ante evaluation is a tool for improving the quality of new or renewed program
and for providing information on the basis of which decision makers can judge the
value of a proposal. Therefore it is important to start ex ante evaluation work early
on in the process when options for program formulation are still open
4. Ex-ante impact assessment
• Public policies that introduce significant changes. These include new
reforms or systemic changes to address critical areas (for instance, in the
education sector, social welfare, health services etc.)
• Public policies that relate to transfers to citizen. An example would be the
public policies to support certain categories of population, such as poor,
unemployed, disabled etc. that involve major budget costs.
• Interventions in the business environment. These include public policies,
such as reduction or increase in the tax rates, provision of subventions etc.,
which might imply significant fiscal costs and/or compliance costs
• Long-term investment projects. Road rehabilitation and construction,
creation of regenerative energy production plants etc. have significant
implications on the budget, economy, welfare and environment.
5. Ex-ante impact assessment
• Fiscal Impact Assessment
• Administrative Impact Assessment
• Economic Impact Assessment
• Social and Poverty Impact Assessment
• Environmental Impact Assessment
The depth of impact assessment may vary depending also on the types
of policy options, data availability and resources’ capacity.
6. Ex-ante impact assessment
• Analysis of Fiscal Impact allows estimating the costs and revenues of policy
options on the budget
• Analysis of Administrative Impact allows envisaging all implementation
related aspects
• Analysis of Economic Impact is meant for reflecting the compliance costs of
policy options and their effect on the economy
• Social and Poverty Impact Assessment shows the policy effects on those
who are poor or are at risk of falling into poverty
• Environmental Impact Assessment is relevant for a range of policy options
on infrastructure, agriculture and energy that affect the environment and
health
8. Regulatory Impact Assessment
• Regulatory Impact Assessment (RIA) is recognized as a key instrument to improve the
quality of regulatory decision making.
• RIA plays a crucial role in improving rule-making quality and promoting good governance.
• High-quality regulations allow for sustainable growth, investments, innovation and
market openness (OECD 2015a)
The ultimate objective of RIA is to improve the quality of regulation.
It is understood as an administrative obligation or an instrument of public policy
analysis for identifying the costs of regulation on certain business sectors (Fischer, Miller
and Sidney 2007; De Francesco, Radaelli and Troeger 2012).
9. What are the key elements in a RIA process?
1. Defining a regulatory problem
This phase is the preliminary point of RIAs: identifying the regulatory or policy
problem. Problems usually fall within 3 categories: market failure, regulatory
inefficiencies and new policy targets or objectives.
2. Identifying different regulatory options
During this step, the need for regulatory intervention identified in phase 1 has to
be translated into concrete policy options.
3. Collecting data
This phase is crucial and the means to achieve it are diverse and vary greatly among
countries. Relevant data for the RIA are collected from public consultations,
telephone and face-to-face interviews, paper questionnaires, online surveys, focus
groups, etc.
10. What are the key elements in a RIA process?
4. Assessing alternative options
The central phase of RIAs most of the time results in a cost-benefit analysis but can
also be a cost-effectiveness analysis or a risk analysis. Options assessed must
include the “no policy change” scenario.
5. Identifying preferred regulatory option/s
Once the different options have been identified and scrutinized (usually by
comparing the costs and benefits), the comparison of the different assessment will
lead to the identification of the most efficient option.
6. Communicating results of the conducted RIA
Once taken into consideration by the policy makers, best practices suggest
publication of the result of the RIA. This allows further exchange with stakeholders
and improves the general transparency of the regulatory process
11. RIA Basic Requirements:
1. Political commitment to establish and operate an effective and self-
sustaining RIA process.
2. A unit or group of regulatory reformers—preferably based in a central area
of government—which oversees, comments and reports on the quality of
regulatory proposals before decisions are made about regulation.
3. Clear and consistently applied criteria and rules employed to screen
regulatory proposals.
4. A transparent regulatory policy development process, which includes
consultation with stakeholders.
5. A capacity building program, involving preparation of guidelines, training
of officials preparing RIA, and establishing monitoring, evaluation and
reporting systems (World Bank 2010a).
14. Choosing the right methodology
• One of the key challenges in performing RIA is the choice of the most appropriate
methodology to assess the impacts and compare alternative regulatory options. A first
important choice to be made.
• There are two main strains in this area: a partial equilibrium analysis and a general
equilibrium analysis.
General Equilibrium Analysis
• The general equilibrium analysis requires modelling abilities, and as such can and should
be chosen only when a number of specific conditions are met: in particular, indirect
impacts have to appear significant, and spread across various sectors of the economy
• there must be sufficient skills within the administration, or the possibility to commission
a general equilibrium modelling analysis from a high quality, reliable group of researchers
inside or outside the administration.
• General equilibrium analysis is preferred by many scholars for its ability to capture very
dispersed indirect impacts of regulation
15. Choosing the right methodology
General Equilibrium Analysis
Using Dynamic Models
Evaluate model performance by comparing forecast based on
structural predictions to experimental results
Wise (1985) : effect of housing subsidy on housing demand
Lumsdaine, Stock and Wise (1992): retirement bonus
Lise, Seitz, and Smith (2003): welfare bonus program
Todd and Wolpin (2006): effects of Mexican school subsidy program
16. Choosing the right methodology
Partial Equilibrium Analysis
Least cost analysis looks only at costs, in order to select the alternative option that
entails the lowest cost. This method is typically chosen whenever benefits are fixed, and
the administrations only needs to choose how to achieve them.
Cost-effectiveness analysis (CEA) entails that administrations quantify (not monetise) the
benefits that would be generated by one USD of costs imposed on society.
The typical method used to compare options is thus the so-called benefit-cost ratio,
which means dividing the benefits by costs. This method is normally used to all
expenditure programs, as it leads to identifying the “value for money” of various
expenditure programs.
Cost-benefit analysis (CBA) entails the monetisation of all (or the most important) costs
and benefits related to all viable alternatives at hand. In its most recurrent form, it
disregards distributional impacts and only focuses on the selection of the regulatory
alternative that exhibits the highest societal net benefit.
17. Choosing the right methodology
Partial Equilibrium Analysis
Cost benefit analysis:
• provides decision makers with quantitative and qualitative information about the likely
effects of each option
• encourages decision makers to take account of all the positive and negative effects of
each option, and discourages them from making decisions based only on the impacts on
a single group within the community
• assesses the impact of each option in a standard manner, which promotes comparability,
assists in the assessment of relative priorities and encourages consistent decision making
captures the various linkages between the regulatory proposal and other sectors of the
economy (for example, increased safety may reduce health care costs), helping decision
• makers maximize net benefits to society helps identify cost-effective solutions to
problems by identifying and measuring all cost
18. Choosing the right methodology
Cost benefit analysis:
There are four stages to cost benefit analysis:
Identify the groups affected by the regulation
Identify the type of costs and benefits
Assessment of the costs and benefits
Decision criteria
Type of costs and benefits
direct and indirect cost and benefits
intangible costs and benefits
19. Choosing the right methodology
Partial Equilibrium Analysis
Multi-criteria analysis allows a comparison of alternative policy options along a
set of predetermined criteria. For example, criteria chosen could include the
impact on SMEs, the degree of protection of fundamental rights, consumer
protection, etc.
Multi-Criteria Analysis is particularly useful when Impact Assessment has to be
reconciled with specific policy objectives, and as such is used as an instrument of
policy coherence. This method is more likely to capture
distributional impacts, although this crucially depends on the criteria chosen for
evaluating options.
20. Ex Ante Evaluation
An Ex Ante Distributional Analysis provides an analysis of both the unintended
and intended consequences of a planned policy on the well-being of
stakeholders.
It can be used to guide program choice among different interventions according
to their likely impact on target populations.
In the context of limited resources a front-end investment in an EADA can be
very cost-effective.
21. Ex Ante Distributional Analysis
• Objectives: What are the social development priorities?
• Stakeholder Analysis: Which stakeholders will influence, benefit, or lose from the
program?
Stakeholders consist of agencies, organizations, groups, or individuals who have a direct or
indirect interest in the intervention or its evaluation. The two basic categories are those
who influence the intervention (positively or negatively), and those who are influenced by
the intervention (negatively and positively). Typically, stakeholder analyses of the target
groups of an intervention are the most rigorous and these may be disaggregated by a large
number of characteristics such as household type, household size, ethnicity, gender,
location, and occupation. The analysis of intra-household effects is also considered
important
• Institutional Analysis: What is the role of institutions in influencing impacts?
• Transmission channel
22. Ex-Ante Cost Benefit Analysis
Ex Ante Cost-Benefit Analysis (CBA) is a quantitative study that seeks to establish if the
benefits expected during the life of a project will exceed its costs.
Both benefits and costs are expressed in monetary terms. A key final output of the
analysis is the establishment of the net present value (NPV) of a project; simply put
this is the expected benefits minus costs of project during its lifetime.
If the NPV is positive and high compared to the NPVs of practicable alternatives (such
as other projects with the same objectives or not doing anything at all), then the CBA
results support an investment in the program.
23. Ex-Ante Cost Benefit Analysis
• Determining alternatives
• Determining whose benefits and costs will be included in the CBA (standing)
• Determining the benefits and costs that will be analyzed
• Monetizing benefits and costs
• Determining the benefits and costs be over the lifetime of the project
• Discounting benefits and costs
Benefits and costs are discounted based on a rate that represents how they change value over time
to provide present-value equivalents.
• Comparing project NPV with NPV of alternatives
• Sensitivity analysis and distributional analysis