Regulatory Impact Assessment: Formal Institutionalization and Practice

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  • Journal of Public Policyhttp://journals.cambridge.org/PUP

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    Regulatory Impact Assessment: FormalInstitutionalization and Practice

    KATARNA STAROOV

    Journal of Public Policy / Volume 30 / Special Issue 01 / April 2010, pp 117 - 136DOI: 10.1017/S0143814X09990201, Published online: 25 February 2010

    Link to this article: http://journals.cambridge.org/abstract_S0143814X09990201

    How to cite this article:KATARNA STAROOV (2010). Regulatory Impact Assessment: FormalInstitutionalization and Practice. Journal of Public Policy, 30, pp 117-136doi:10.1017/S0143814X09990201

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  • Regulatory Impact Assessment:Formal Institutionalization and Practice

    KATARNA STARONOV * The Institute of Public Policy, ComeniusUniversity

    ABSTRACT

    In the last decade regulatory reforms have focused increasingly on effortsto improve regulatory quality. As part of that development policymakershave been encouraged to consider fiscal, socio-economic and adminis-trative effects of proposed legislation when making policy choices. TheCentral and East European EU member states have adopted regulatoryimpact analysis (RIA) mechanisms but so far there has been little analysisof their implementation. This article first compares the manner in whichRIAs have been institutionalised in the Czech Republic, Estonia,Hungary, Slovakia and Slovenia. Second, it explores how differences ininstitutionalisation have affected RIA performance. The paper concludesthat there are marked differences in the RIA quality across Central andEastern Europe, notably as a consequence of national differences ininstitutional and administrative contexts and capacities.

    Key words: regulatory impact assessment, regulatory quality, institutions, capacity,Central and Eastern Europe

    Introduction

    Recent years have seen the adoption of a system of ex ante regulatoryimpact assessment (RIA) in many EU countries, including the new EUmember states in Central and Eastern Europe (CEE). Most studiesassume that the availability and use of information from RIAs lead tobetter law-making and improve regulatory quality (Hahn and Litan; OECD ; European Commission ). RIAs are alsoexpected to enhance the accountability and legitimacy of policy-making and law-making. In the view of both the OECD and the EU,RIA is an integral part of good governance, and economic, social

    * The author thanks Jon Ender from Estonia; Katarina Krape, Slovenia; Jan Pavel,Czech Republic; Krisztina Jager, Hungary; and Marin Kidurka from Slovakia forvaluable research assistance in the compilation of data for this article and panellistsand Radoslaw Zubek at the workhop of the European Insitute, LSE, and twoanonymous referees for their helpful comments.

    Jnl Publ. Pol., , , Cambridge University Press, doi:10.1017/S0143814X09990201

  • and environmental impact assessment is becoming a standard forpolicy-makers throughout the EU (European Commission ).

    There is some literature that has studied the implementation of RIAsystems in the United States, West European states and the EuropeanCommission (Hahn et al. ; Lee and Kirkpatrick ; Radaellia, b; Renda ). But relatively little attention has beengiven to the implementation record of RIA systems in the new EUmember states (but see Kasemets and Liiv ; Staronov ;Zubek ). While some form of RIA is being used in all of thesecountries (OECD SIGMA ), one can expect that RIA performancewill vary across the region. This paper investigates whether this is,indeed, the case. It compares the institutionalization of RIA in fiveCEE countries the Czech Republic, Hungary, Estonia, Slovakia andSlovenia , investigates the implementation records and seeks toexplain the differences that it finds. The paper does not focus on thepatterns of diffusion of RIA practices. It assumes that the RIA bottlehas been already diffused; the question is: what wine is in the bottle(Radaelli b)?

    The study seeks to identify the effects of different types of RIA ruleson performance and on the quality of RIAs. The five countries studiedhere belong to the wave of EU enlargement, but they differ inconditions of RIA implementation. There are differences in theduration of the RIA regime, ranging from years in Hungary to fiveyears in Slovenia. The countries also vary when it comes to thepresence of a coordinating and oversight body that provides RIAguidelines and training. Thus, Estonia has a strategic centre at theState Chancellery, the Czech Republic and Hungary have RIAcoordinating centres at line ministries, whilst Slovakia and Slovenia donot have any type of coordinating centres. Finally, there are furtherdifferences in institutional context, for example, in the availability ofdetailed guidelines. All of these factors are examined with a view toidentifying their effect on the performance of Regulatory ImpactAssessment.

    Conceptual framework

    RIAs are often understood as tools in the hands of a principal seekingto control an agent (Froud et al. ; Posner ; Rowe ). Theprincipal is the centre of government which introduces the new systemof impact assessment with the aim of improving regulatory outcomes,whereas the agents are line ministries which implement RIA whenpreparing legislative proposals for cabinet decisions. In order to

    Staronov

  • encourage the agent to engage with RIA substantively rather thanformally, the principal sets up an oversight body for RIA quality.Renda () ascribes to such an oversight centre a number of powersand duties, such as advocacy, consultation, guidance, coordination,training, annual reporting and maintaining institutional relations. A keyhypothesis is thus that the more power the centre of government hasin terms of internal oversight, the better the quality of the RIA processand its outputs. Conversely, the weaker the central executive authority,the less oversight in place and the more ministries will treat RIA as anexercise that involves little more than ticking the boxes.

    Resources at ministerial level are also likely to matter for RIAperformance. The way in which formal rules for conducting RIAs havebeen established, the degree to which they correspond to administrativecapacity at the level of line ministries and the broader institutionalcontext are, therefore, important factors to consider when one seeks toaccount for RIA performance. The clearer and more detailed theinstructions provided to the administration by the formal framework ofrules, the higher the probability of good performance. Moreover, onemay expect that the longer formal RIA rules have been in place,the better implementation results are likely to be. However, delay inthe institutionalization of RIA need not mean worse performance if thedelay is due to a careful phase-in of the framework.

    The key expectations are thus as follows: the existence of either astrong centre of government or a RIA coordinating body would bereflected in better RIA performance due to enhanced leadership,oversight and guidance. Also, clear formal rules on how to undertakeRIA would have a positive effect on overall results. It may also beexpected that the duration of the RIA regime will affect performancebecause of a learning process at the administrative level.

    When it comes to determining RIA quality and how to measure it,Radaelli () distinguishes between two approaches: indicators andtests. In both, the main aim is to check the validity, reliability andother properties of quality. By contrast, Hahn et al. () havedeveloped a scorecard that assesses the key assumptions and theappropriateness and application of models used in particular analyses.The present paper takes yet a different approach. It focuses on thequality of information RIAs contained in the explanatory memorandaattached to draft legislation. Thus, in our analysis, RIAs are not judgedby their validity, truthfulness or the appropriateness of assumptions andmethods used, but simply by, first, the existence of certain types ofinformation contained in the explanatory memoranda, and, second, byindicators of the quality of this information.

    The quality of RIA information is evaluated in three principaldimensions: (i) regulatory issues addressed, (ii) types of impact analysis,

    Regulatory Impact Assessment: Formal Institutionalization and Practice

  • (iii) consultation process (cf. European Commission ). Regulatoryissues may include identification of the problem to be solved, objectivesto be achieved, policy options considered, positive and negativeimpacts, comparison of options, monitoring and evaluation. Thesecond dimension relates to the details of the analyses conducted insocial, economic and environmental areas. Traditional fiscal impactassessment (impacts on the state budget) is also included to betterdifferentiate between internal impact on the state and externalimpact on the society. Thus, this analysis looks at identification ofimpacts in each area, the provision of qualitative or quantitative datain each area, the identification and quantification of costs and benefits,as well as mutual trade offs. The third dimension consultation process concerns the way in which affected parties are identified and broughtinto the policy-making process as well as how the results of suchconsultations are presented in the explanatory memoranda.

    The study is based on an analysis of explanatory memoranda andRIA statements attached to parliamentary bills that governmentssubmitted to parliaments in or in the Czech Republic . Theempirical analysis omits other material submitted for discussion to thegovernment, such as statements on legislative intent, concept papers,strategies, or action plans. The reason for this empirical focus istwofold. First, most policies in CEE require legislation. Thus, lawstypically have a significant impact on the lives of citizens. Second, it isthe process of preparing legislation rather than the policy processoverall that is usually subject to detailed regulations. The methodologyemployed in this study is based on previous content evaluations ofRIAs (Renda , Zubek , Staronov ), though it differs fromthem in that the present study is designed to probe the effects ofinstitutionalization on performance.

    Institutionalization of RIA

    This section looks at how the RIA process has been institutionalized inthe five countries studied here. Table summarizes the results.

    Typically, RIA is often adopted as part of a wider better regulationagenda. The CEE countries have followed a different path in thisrespect, since in all of them RIA was adopted prior to the developmentof better regulation programmes. Hungary and Estonia are theforerunners in RIA adoption, in and respectively, followedby the Czech Republic and Slovakia. In the Czech Republic, theLegislative Rules of Government introduced a RIA requirement in, but it only entered into force in . In Slovakia, the first

    Staronov

  • T.

    Inst

    itutio

    naliz

    atio

    nof

    Res

    earc

    hIm

    pact

    Ass

    essm

    ent

    RIA

    Reg

    ime

    Cze

    chR

    epub

    licE

    ston

    iaH

    unga

    rySl

    ovak

    iaSl

    oven

    ia

    RIA

    syst

    emad

    opte

    d

    ***

    RIA

    pilo

    tsY

    es()

    No

    No

    Yes

    ()

    Yes

    ()

    Bet

    ter

    Reg

    ulat

    ion

    Polic

    y

    No*

    Uni

    tre

    spon

    sibl

    efo

    rPo

    licy

    Min

    istr

    yof

    Inte

    rior

    **N

    oM

    inis

    try

    ofJu

    stic

    eM

    inis

    try

    ofE

    cono

    my

    Min

    istr

    yof

    Publ

    icA

    dmin

    istr

    atio

    nR

    IAgu

    idel

    ines

    Ado

    pted

    in

    Ado

    pted

    in

    Prep

    ared

    in

    -,

    but

    not

    adop

    ted

    Ado

    pted

    in

    Prep

    ared

    in

    ,bu

    tno

    tad

    opte

    dQ

    ualit

    yas

    sura

    nce

    revi

    ewG

    over

    nmen

    tOffi

    ce**

    **St

    ate

    Cha

    ncel

    lery

    and

    Min

    istr

    yof

    Just

    ice

    PMO

    office

    Leg

    isla

    tive

    Cou

    ncil

    Min

    istr

    yof

    Eco

    nom

    yan

    dM

    inis

    try

    ofPu

    blic

    Adm

    inis

    trat

    ion

    RIA

    over

    sigh

    tbo

    dyM

    inis

    try

    ofIn

    teri

    orN

    one

    Min

    istr

    yof

    Just

    ice

    Non

    eN

    one

    RIA

    staff

    atm

    inis

    teri

    alle

    vel

    Spec

    ial

    depa

    rtm

    ent

    inM

    inis

    try

    ofIn

    teri

    orSp

    ecia

    lun

    itsN

    one

    Non

    eN

    one

    *pla

    nned

    for

    **m

    oved

    from

    Gov

    ernm

    ent

    Offi

    cein

    ***i

    neff

    ect

    from

    ****

    until

    ,un

    clea

    raf

    terw

    ards

    .So

    urce

    :co

    mpi

    latio

    nby

    the

    auth

    or

    Regulatory Impact Assessment: Formal Institutionalization and Practice

  • requirements for RIA were introduced in November via anamendment of the Legislative Rules of the Government, followingrecommendations by the Audit of State Administration. In , theSlovenian government signed The Act on Cooperation between the NationalAssembly and the Government in EU Affairs, which obliges the Governmentto carry out assessments of the impact and implications of draftEU-related measures. Overall, the rhetoric of better regulation waslargely absent when RIA was initially adopted.

    When it comes to the adoption of RIA guidelines, the record ofCEE states was patchy. By /, only the Czech Republic andEstonia had adopted RIA guidelines, Slovakia did so at the end of. In Estonia, well-structured and detailed manuals have beendrawn up to help the preparation of explanatory memoranda for draftlegislation at both governmental and parliamentary levels as well as amulti-stage system for quality control (Kasemets and Liiv ). TheCzech Republic has prepared guidelines on the basis of prior pilotingof RIA.

    The countries studied here, with the exception of Estonia, have notset up strong centres of government that would act as a coordinatingunit vis--vis line ministries in the preparation of strategies, inadministrative planning or in synchronising the policy process. InEstonia, overall policy, EU and strategic planning has been entrustedto the State Chancellery (OECD SIGMA ), which has developeda system of communication with liaison personnel in the line ministries.The centre is well organized, with competent staff with good mana-gerial skills and is strong in coordination. It reviews draft laws to ensureconformity with strategic plans and overall government priorities aswell as controlling the quality of explanatory memoranda.

    In the Czech Republic and Hungary, there have been some effortsto set up a unit for coordinating RIA, but they have been only partiallysuccessful. In the Czech Republic, there used to be a specialDepartment for Regulatory Reform at the Government Office. Itoperated under direct supervision of the Deputy Prime Minister forEconomic Affairs and consisted of analysts who were to assist in RIAdevelopment in line ministries. In -, the department piloted RIAand developed a methodology which was later adopted by theGovernment (Staronov, Pavel and Krape, ). The Departmentwas moved to the Ministry of Interior in November , and itsresponsibilities in quality assurance have become unclear.

    In Hungary, overall coordination is fragmented. The Prime MinistersOffice provides overall inter-ministerial coordination and houses aspecial unit composed of advisors who summarize opinions on eachlegislative proposal (OECD SIGMA ). But it is the Ministry of

    Staronov

  • Justice that has a general responsibility for law-making and it is herethat, in , the Department of Impact Analysis, Deregulation andRegis...

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