An Evaluation of the Quality of Impact Assessment in the European Union with Lessons for the U.S. and the EU

Abstract

Governments throughout the world are requiring greater use of economic analysis as a way of informing key policy decisions. The European Union now requires that an impact assessment be done for all major policy initiatives. An evaluation of the EU system could provide lessons for the U.S. and determine whether the EU is allocating resources for analysis efficiently. This paper provides a comprehensive analysis of the use of impact assessment in the European Union since its inception, using the largest available dataset. We score these assessments using a number of objective measures of quality, such as whether a particular assessment provides information on costs, benefits, or alternatives. In addition, we provide the first empirical evaluation of the EU principle of proportionate analysis, which calls for the application of more rigorous analytical standards to important policy initiatives. In general, we find that recent EU impact assessments include more economic information, but many important items are still missing. We also provide evidence that the quality of EU impact assessment increases with the expected cost of the proposal, which is consistent with the proportionality principle. Furthermore, while we find that the average quality of EU assessments lags behind U.S. assessments, we cannot reject the hypothesis that the analysis done for important initiatives in the EU is of similar quality to the analysis done in the U.S. Finally, we offer concrete suggestions on how the EU and U.S. might improve their evaluation processes by learning from each other.