A. 6. Appendices
2. Definitions - Glossary
Term Definition
Administrative cost Administrative costs are defined as the costs incurred by enterprises, the voluntary sector, public authorities and citizens in meeting legal obligations to provide information on their action or production, either to public authorities or to private parties. The
1The definitions in this Glossary are edited versions of the definitions given in basic methodological documents of international organisations such as the EU, the OECD and the World Bank.
Term Definition
administrative costs consist of two different cost components: the business-as-usual costs and administrative burdens. While the business-as-usual costs correspond to the costs resulting from collecting and processing information which would be done by an entity even in the absence of the legislation, the administrative burdens stem from the part of the process which is done solely because of a legal obligation.
Baseline scenario In the context of an impact assessment the aim of the baseline scenario is to explain how the current situation would evolve without additional public intervention – it is the ‘no policy change’ scenario. A clear baseline scenario also functions as the basis for comparing policy options
Before-after (pretest-post test) control group design A type of experimental design applied in policy research and in other fields of social research such as marketing research. The measure may be a policy, a regulation or a marketing strategy. The target group is exposed to the measure, while the control group is not.
Pretest (i.e. before the implementation of the measure) and posttest (after) measurements are made on both groups.
Benefit Compliance with the requirements of regulations may
generate positive effects, which are regarded as benefits. Such benefits are, for example, advantageous changes in the field environment protection, food safety, the safety of industrial products or traffic safety. A decrease in compliance costs can also be regarded as a benefit. For example, if the regulation replaces an earlier, less advantageous regulation, then the decrease of compliance costs may increase the willingness of entrepreneurs to invest and innovate and the resulting increase of competitiveness can also be registered as a positive impact.
Beneficiaries The individuals, groups, or organizations, whether targeted or not, that benefit, directly or indirectly, from the development intervention.
Better Regulation Programmes Many countries apply RIA as an integral part of long term programmes for checking and maintaining the quality of planned regulations. In most of these cases the main purpose of preparing RIAs is to improve the regulatory environment for businesses, citizens and consumers, to use RIAs in the consultation process.
Business angel A business angel is an informal investor, usually a successful entrepreneur, who is willing to invest in high-risk, high-growth firms at a very early stage, and adds value by supplying hands-on business advice as well.
Term Definition
Business climate Business climate is a term which indicates how business development is supported by state, regional and local policies, by local communities, how
business-to-business networks and labour relationships facilitate business activities. A good business climate allows businesses to conduct their affairs with minimal interference from authorities, while enabling the access to high quality inputs and to customers at low costs, offering investment possibilities with few risks and higher returns when compared to other places. The key factors used in the measure of business climate include macroeconomic stability, business and income tax levels, workforce availability, energy costs, market size, availability, cost and quality of services, real estate and infrastructure, business friendliness of the regulatory framework, access to financing, capital and incentives.
Business cycle Business cycles are a type of fluctuation found in the aggregate economic activity. A cycle consists of an expansion, i.e. a time period characterised by economic growth, followed by recessions or crises.
Business survey Business surveys are questionnaire based surveys in which a sample of companies is asked about company activities, plans, expectations and their opinion about the business environment. Small business surveys are crucially important information sources for analysing and modelling business cycles
Causality Causality is the relationship between an event (the cause) and a second event (the effect), where the second event is understood as a consequence of the first one. Every impact assessment must cope with the basic problem of causal inference. Since the outcomes under the counterfactual (hypothetical) scenario are not observable, the comparison of the two sets of
outcomes under the two scenarios cannot be based on a solid empirical basis. This leads to the so-called fundamental problem of causal inference, i.e. that causality is not directly observable. However, a series of impact assessment methods have been developed to make indirect inferences to causality.
Competition policy Government policy to prevent and reduce the abuse of monopoly power and to ensure fair competition.
Competitiveness The ability and performance of a firm, sub-sector or country to sell and supply goods and/or services in a given market. National level competitiveness is dependent on the set of institutions, policies, and factors that determine the level of productivity of a country. The term may also be applied to markets, where it is used to refer to the extent to which the market structure may be regarded as perfectly competitive. This usage has nothing to do with the
Term Definition
extent to which individual firms are competitive.
Compliance cost An expenditure of time or money in conforming to government requirements such as legislation or regulation.
Control group In program evaluation, the group that does not participate in the program. In the context of experimental design of impact assessment in the framework of SME policy: A group of companies that has not been exposed to the policy intervention is called a control group, if its composition is comparable and similar to the group which was exposed to the policy intervention. The two groups are compared in order to clarify, whether the outcomes can be attributed to the intervention, i.e. whether a causal mechanism can be identified.
Cost-benefit analysis Cost-benefit analysis is a technique designed to determine the impacts of a project or plan by
quantifying and monetising both its costs and benefits.
Its main steps are as follows. (1) The researcher lists all expected benefits and costs, and calculates (or estimates) their expected magnitude (in physical terms). (2) Lists the expected time-path of the impacts.
(3) Express the value of the impacts in monetary terms for each time period (e.g. year). (4) Calculates the discounted value of costs occurring in the future by using a standard discount rate (e.g. the central interest rate) (5) Calculates the discounted value of benefits by the same method. (6) Calculates the net present value by subtracting the above two values from each other.
(7) Indicates which margins of error or uncertainty need to be taken into account.
Cost-effectiveness analysis Cost-effectiveness analysis is a technique designed to determine the impacts of a project or plan by
quantifying its costs, but not expressing its benefits in monetary terms. The starting point of this analysis is that while the costs attributable to an intervention can be more or less precisely quantified, benefits cannot.
That is why this approach either (a) compares alternative plans that guarantee the same benefits and chooses from among these the cheapest one, or (b) compares various alternatives characterised by the same cost level and chooses the one which promises the most favourable benefits.
Counterfactual A hypothetical situation, condition, course of events or a scenario which is running contrary to the facts. In ex post impact assessment a counterfactual scenario is the likely course of events that would have happened if the analysed measure (an implemented policy or
regulation) had not been taken. This scenario is called counterfactual, because it is disregarding the fact that in reality the measure has been implemented..
Term Definition
Dependent variable The variable to be explained in a multiple regression model. In the context of impact assessment, an indicator which shows, to what extent the
implementation of the measure successful or efficient.
Deregulation The removal or simplification of government rules and regulations that constrain the operation of market forces. Deregulation programmes and campaigns attempt to keep the necessary laws against fraud, pollution or dangerous food, while eliminating or reducing government control of how business is done.
Deregulation is an activity where RIA can be
successfully applied. If there are doubts about phasing out a regulation or not, a simplified RIA procedure can help in decision making.
Difference-in-differences method The impact of a policy on an outcome can be estimated by computing a double difference, one over time (before-after) and one across subjects (between beneficiaries and non beneficiaries).
Direct impacts These are the changes in costs and investments that arise as an immediate consequence of complying with the regulation. Changes in administrative activities, company re-organisations, and change of products and technologies that are attributable to the regulation are converted into monetary terms and interpreted as the total of the direct costs arising for the enterprise.
Discount rate In the context of cost-benefit analysis, the future costs and benefits are discounted (reduced) because it is assumed that they are not worth as much to people today, because people would rather have money and benefits now than later. In order to put everything into today's values a discount rate is applied to future values. The choice of a discount rate makes a big difference to the outcome of a cost-benefit analysis.
Distributional effects The compliance costs and the benefits of a policy intervention are unevenly distributed among the affected industries, consumers, regions. In the context of impact assessment, distributional effects are criteria showing the extent to which a policy design will result in disproportionate impacts on different regions, sectors, or households
Doing Business A project of the World Bank providing objective measures of business regulations for local firms in 183 economies and selected cities at the sub national level.
By gathering and analyzing comprehensive quantitative data to compare business regulation environments across economies and over time, it offers country rankings since 2004.
Dual economy A dual economy is the existence of two separate
Term Definition
economic sectors within one country, divided by different levels of development, technology, and different patterns of demand.
Effectiveness The extent to which the development intervention’s objectives were achieved, or are expected to be achieved, taking into account their relative importance.
Endogenous variables In simultaneous equations models, variables that are determined by the equations in the system.
Europeanisation process In the context of the European integration process: the institutionalization of a distinctly European political system.
Evaluation The systematic and objective assessment of an
on-going or completed project, programme or policy, its design, implementation and results. The aim is to determine the relevance and fulfilment of objectives, development efficiency, effectiveness, impact and sustainability. An evaluation should provide information that is credible and useful, enabling the incorporation of lessons learned into the decision–
making process of both recipients and donors.
Evaluation also refers to the process of determining the worth or significance of an activity, policy or program.
An assessment, as systematic and objective as possible, of a planned, on-going, or completed development intervention.
Ex-ante evaluation An evaluation that is performed before implementation of a development intervention.
Ex-post evaluation Evaluation of a development intervention after it has been completed.
Experimental design A type of research design in which the conditions of a program or project (also called as „treatment") are controlled by the researcher whereby subjects are randomly assigned to treatment group or to the group which does not receive the treatment (the so-called control group). The control group is a valid
comparison group since there should be no systematic difference between their characteristics and those of the treatment group. Observations or measurements are made on both groups in order to reveal the impacts of the treatment. The purpose of experimental design is to rule out alternative causes, leaving only the actual treatment that is the real cause.
External evaluation The evaluation of a development intervention conducted by entities and/or individuals outside the donor and implementing organizations.
Externality In economics, an externality (or transaction spillover) is a cost to be paid or a benefit enjoyed by a party (a
Term Definition
„third person") who did not agree to the action that causes the cost or benefit. These costs of benefits are not appearing in, are not transmitted through the prices of the action that causes the externality. A benefit in this case is called a positive externality or external benefit, while a cost is called a negative externality or external cost. Many negative externalities (also called
"external costs" or "external diseconomies") are related to the environmental consequences of production.
Fiscal and monetary policies Fiscal policies are government decisions usually relating to taxation, customs and government spending.
Monetary policy is the regulation of the supply of money and interest rates, controlled by the National Bank.
Full RIA A detailed Regulatory Impact Assessment study with
reliable findings and recommendations, based on a wide range of information sources such as
consultation. As a rule, full RIAs are not prepared by Government officials, but are outsourced to external consultants, researchers or to academic organisations.
Governance In the context of public administration, governance is what a government does, i.e. the management power and policy by using the government as an instrument.
Impact Positive and negative, primary and secondary
long-term effects produced by a development intervention, directly or indirectly, intended or unintended.
Theoretically, an inference about the existence of an impact of an intervention can be made only by comparing two scenarios: (a) the one in which the assessed measure was taken and (b) another scenario in which the measure was not taken. One of the above scenarios is counterfactual.
Impact Assessment A process that prepares evidence for political decision-makers on the advantages and disadvantages of possible policy options by assessing their potential consequences. Analyses, explanations about the expected of certain social-political interventions, policies and measures, based on empirical evidence.
Independent variable In regression analysis, a variable that is used to explain variation in the dependent variable.
Indicator Quantitative or qualitative factor or variable that provides a simple and reliable means to measure achievement, to reflect the changes connected to an intervention, or to help assess the performance of a development actor.
Indirect impacts Indirect impacts are developments caused by a project or policy intervention, but unlike direct effects, occur (a) either later in time or (b) further away along the
Term Definition
causal chain or (c) are farther removed in distance or (d) as a result of a complex causal pathway. A regulation may have un-intended indirect effects such as a group of companies gaining or losing markets, or experiencing changes in productivity and
competitiveness. The direct consequence of a simplified customs procedure can be the reduction of transaction costs of exporting firms, which may trigger the indirect effect of increased trade between certain countries.
Initial RIA An initial RIA (Regulatory Impact Assessment) is a
relatively short document prepared at an early stage of the policy process. It can consist of a rough and quick analysis based on what is already known, including the best available estimates of the possible risks, benefits and costs. The document helps to identify areas where more information is needed.
Internal Rate of Return The internal rate of return is a calculated discount interest rate which if applied, yields a zero net present value to the investment. If the calculated internal rate of return is negative or low the donor may prefer alternative projects, which yield better interim cash flows.
Interrupted Time Series Design A research design using the time series of a key variable for a time interval which starts well before the date of the intervention and ends well after that date.
Legal harmonisation Cooperation between governments to make laws more uniform and coherent. The European Community has institutionalised legal harmonisation in order to achieve uniformity in laws of member states in various policy fields, e.g. to facilitate free trade or to protect fundamental rights of citizens. Several potential member countries of the European Union have been embarking on extensive or sporadic RIA programmes for facilitating the harmonisation process between European laws and the respective national legislations.
Logical Framework Management tool used to improve the design of interventions, most often at the project level. It involves identifying strategic elements (inputs, outputs, outcomes, impact) and their causal
relationships, indicators, and the assumptions or risks that may influence success and failure. It thus facilitates planning, execution and evaluation of a development intervention.
Macro-econometric models Econometric models, usually a set of equations, using macro level statistical data. These models are designed to evaluate macro-economic and sectoral impacts of economic or environmental policies.
Market failures Lack of efficiency in the allocation of goods on a
Term Definition
particular market of products or services. Scenarios where individuals' pursuit of pure self-interest leads to results that are not efficient from the point of view of the society. Market failures are often associated with (a) biased or asymmetric information, (b) non-competitive markets or (c) costs to be paid by third parties (externalities). The existence of a market failure is often used as a justification for government
intervention in a particular market.
Monitoring A continuing function that uses systematic collection of data on specified indicators. It provides project management and the main stakeholders of an ongoing development intervention with indications of the extent of progress and achievement of objectives and
progress in the use of allocated funds.
Multicriteria analysis Evaluation technique whereby various aspects and dimensions of positive and negative impacts are combined and aggregated into a single framework to allow easier comparison of scenarios. It allows to present impacts that are a mixture of qualitative, quantitative and monetary data, and where there are varying degrees of certainty. Multicriteria analysis usually will be implemented by defining a scoring, ranking or weighting system which expresses the importance or monetary value attached to each of these criteria.
Net Present Value The difference between the sum of discounted benefits and the sum of discounted costs of a policy option is called its net present value. Can be calculated if both costs and benefits are monetizable and easy to forecast for the full analysis period.
One-stop systems of administrative procedures One-stop systems – also called single window systems – are client service offices of authorities, offering a wide range of administrative services for companies and citizens at one location or on-line. Frequently, several authorities that have the same target group of companies jointly offer these services.
Partial RIA A partial RIA is a Regulatory Impact Assessment
document building on the initial RIA, but its
sophistication and level of detail does not reach that of the full RIA. It includes refined policy options on regulation, compliance, monitoring, cost and benefit estimates and risk analysis. An assessment of the impacts on competition and on small firms should be included.
Performance of a development intervention The degree to which a development intervention or a
Performance of a development intervention The degree to which a development intervention or a