RIA encourages an approach that is evidence-based to development of policies and this ensures that all the possible options for addressing an issue have been considered and the benefits of the chosen option does not just exceed the cost, but also brings about the highest degree of net benefit. It is implemented in many countries and incorporates a range of methods. Regulatory Impact Assessment is an important component of the evidence-based approach that helps in policy making (OECD, 2002).
Economic impact assessments (EIA) are a unique technique of analysis that calculates direct, indirect, and induced benefits that come with a project. An important factor in economic impact assessment is its consideration of multiplier effects that result from projects, more so those that relate to employment and expenditure (OECD, 2002). This technique of assessment assumes that there will be an increase in employment as a project outcome, without any effects on wages and prices. This is taken as a possibility since resources that were previously used or unused will become employed, as is the case in the assumptions of input and output model.
RIA has a role of providing systematic and detailed appraisal of possible impacts of the new regulation so as to find out if the regulation is able to achieve the set objectives. RIA is needed because regulations normally have many impacts which are not easy to foresee without conducting a thorough study and involving affected parties. The main objective of RIA is to make sure that regulations will enhance the welfare of the society that is to say that benefits will be more than the costs. Therefore using appropriate discounting methods ensure that we opt for the most beneficial alternative making RIA and EIA the best assessment methods.
References
OECD (2002). Regulatory Policies in OECD Countries: From Interventionism to Regulatory Governance.
