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Policy Analysis

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Tax structure on automobiles are based on engine displacements. ... Inter-dependence effects of the 15% excise tax on the macro-economy. Criteria for Judging ... – PowerPoint PPT presentation

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Title: Policy Analysis


1
Policy Analysis
2
  • We are solving economic problems politically.
  • Sec. Cito Lorenzo
  • Presidential Adviser for One Million Jobs

3
Policy Analysis Historical Trivia
  • 1st used by Charles Lindblom in 1958
  • A type of quantitative analysis involving
    incremental comparisons in which qualitative
    methods are included in recognition of values and
    policy
  • Lindblom (1959) wrote of government as the
    science of muddling through

4
Policy Analysis Other Definitions
  • Use of reason and evidence to choose course of
    action to attain a given set of goals/objectives
  • A body of concepts and principles aimed at
    helping the decision maker make choices
    intelligently, ethically and effectively.
  • Analyzes existing practices/policies for
    effectiveness.

5
What is a policy?
  • A policy is a course of action or inaction chosen
    by public authorities to address a given problem
    or interrelated set of problems.
  • Source Leslie Pal, Beyond Policy Analysis
    Public Issue Management in Turbulent Times, 2nd
    edition (Scarborough, ON Nelson, 1997)

6
What Policy Analysis is not
  • Is not an exact science
  • Is not infallible
  • Is not a tool for advocacy of views of the
    analyst

7
Dimensions of Policy
8
FRAMEWORK
Policy Analysis
Theoretical Basis
Process
Tools
  • Economic
  • Political
  • Formulation
  • Implementation
  • Evaluation
  • Quantitative

9
Dimensions of Policy
Inter-Island Shipping Bill
  • Legal
  • Bill proposes to lift the Cabotage Law by
    amending the Tariff and Customs Code of the
    Philippines to allow foreign vessels to operate
    domestically
  • There is a need to amend the Constitution (Art.
    XII Sec. 11 stipulates maximum 40 foreign
    equity in domestic shipping)

10
Dimensions of Policy
Inter-Island Shipping Bill
  • Economic
  • Increased competition to lower transport cost and
    improve quality of service (foreign vs. local)
  • Global competitiveness, countryside development
    vs. domestic shipping industry
  • Political
  • Lifting the Cabotage Law is not a politically
    viable option (strong pressure from domestic
    shipping industry)

11
Approaches in Policy Analysis
  • Basic Analysis
  • a subset of policy analysis methods comprising
    quickly applied but theoretically sound ways to
    aid in making policy decisions
  • Policy Research
  • a subset of policy analysis methods requiring
    substantial budget, time and data to achieve
    results

12
Elements of Policy Analysis
Policy Analysis
Formulation
Implementation
Evaluation
  • What should be our goals?
  • Which option or option mix promises fewest
    negatives and greatest benefits?
  • What is the problem?
  • Is the policy politically viable?
  • What variables are available to help ensure the
    successful implementation of the policy?
  • By what criteria can be policy be judged fair?
    Judged good?

13
Relationship of Policy Analysis/Review and
Policy Formulation
  • NEW POLICY
  • Policy Formulation
  • Problem Identification and Analysis
  • Policy Proposal
  • Policy Implementation
  • Policy Adoption
  • Program Operation
  • Policy Evaluation
  • EXISTING POLICY
  • Policy Analysis/
  • Review
  • Policy Reform
  • Policy Implementation

14
Players in the Policy-Making Process
  • Policy-makers (executive, legislative and
    regulatory)
  • Policy Advocates (individual, business entities,
    special interest groups)
  • Affected Parties (consumers/general public)
  • Media

15
Criteria for JudgingPolicy Outcomes
  • Efficiency
  • Equity
  • Growth
  • Stability

16
Criteria for Judging Policy Outcomes
  • EFFICIENCY
  • Allocative efficiency. An efficient economy is
    one that produces what people want and does so at
    the least possible cost.

17
Criteria for Judging Policy Outcomes
  • EQUITY
  • Fairness. May imply a more equal distribution of
    income and wealth.

18
Criteria for Judging Policy Outcomes
  • GROWTH
  • Economic growth is an increase in the total
    output of an economy brought about by devising
    new and better ways of producing goods and
    services.

19
Criteria for Judging Policy Outcomes
  • STABILITY
  • A condition in which output is steady or growing,
    with low inflation, and full employment of
    resources.

20
Criteria for Judging Policy Outcomes
  • EXAMPLE
  • Economic Evaluation of the Proposed Excise Tax on
    Light Commercial Vehicles (Carandang, 1997)
  • Tax structure on automobiles are based on engine
    displacements.
  • However, small cars (1300 cc) and LCVs with
    seating capacity of less than 10 are subjected to
    an excise tax.
  • A proposal was considered to subject LCVs with
    more than 9 seating capacity to a flat rate of
    15 regardless of engine displacement and type of
    fuel used.

21
Criteria for Judging Policy Outcomes
  • It is intended to close the gap between utility
    vehicles (which are not subjected to excise tax)
    and low-priced cars (which are subjected to
    excise tax).
  • It is also intended to simplify the tax structure
    and encourage the broadening of the tax base.

22
Criteria for Judging Policy Outcomes
  • Evaluation focused on
  • Efficiency
  • Effect on govt tax collection target of P1.1
    billion
  • Equity
  • Welfare cost
  • Growth
  • Impact of the 15 excise on LCV sales
  • Stability
  • Inter-dependence effects of the 15 excise tax on
    the macro-economy

23
Criteria for Judging Policy Outcomes
  • Methodology
  • Efficiency
  • Regression Model (for forecasting tax collection)
  • If Forecasted Tax Value is greater than the
    Target Tax Collection, the tax policy is
    efficient
  • Equity
  • Consumer Surplus Analysis using price
    elasticities (to derive the excise burden of
    tax or deadweight loss)
  • Excise burden of tax is defined as a loss of
    welfare above and beyond the tax revenues
    collected
  • Rule of thumb Welfare cost must not exceed 5 of
    the government revenue gain

24
Criteria for Judging Policy Outcomes
  • Methodology
  • Growth
  • Regression Model (for forecasting LCV sales)
  • Stability
  • Input-Output Analysis (for establishing backward
    and forward linkages and quantifying impact of
    changes on the final output)

25
Criteria for Judging Policy Outcomes
  • Results
  • Efficiency
  • Target Tax Collection of P1.1 billion will not
    likely to be met (Forecasted Tax Value is only
    P930 million)
  • The tax policy is inefficient
  • Equity
  • Excess burden of tax (9.5) is greater than the
    5 rule of thumb

26
Criteria for Judging Policy Outcomes
  • Results
  • Growth
  • Based on the forecast, LCV sales will decline by
    6.1 with the implementation of the tax policy.
  • Stability
  • Based on I-O Analysis, the economy stands to lose
    P1.185 billion worth of goods and services being
    provided by the other sectors forwardly and
    backwardly linked to the automotive industry if
    the tax policy is implemented.
  • Recommendation
  • Government should not implement the proposed
    excise tax on LCVs.

27
Example of Possible Options to an Identified
Policy Problem
  • Problem Environmental costs of logging are not
    shouldered by loggers
  • Options
  • Class lawsuit against loggers for damage due to
    erosion and flooding
  • Increase taxes and fees paid by loggers
  • Reforestation tax paid directly to local
    governments for funding commercial reforestation
  • Transfer the residence of the logger where he
    will be the first to suffer from erosion and
    floods

28
Example of Possible Options to an Identified
Policy Problem
  • Problem Environmental costs of logging are not
    shouldered by loggers
  • Options
  • Levy a license fee that will be deposited in a
    trust fund, the annual proceeds from which will
    subsidize the cost of fertilizers to make up for
    loss of topsoil
  • Give local communities suffering from negative
    environmental consequences of logging a share in
    the ownership of the logging firm
  • Use timber tax to fund researches for developing
    methods for quantifying the liabilities and
    compensatory fees from loggers

29
Example of Possible Options to an Identified
Policy Problem
  • Problem Environmental costs of logging are not
    shouldered by loggers
  • Options
  • Give negatively affected communities the first
    priority for employment by logging firms
  • Deputize negatively-affected local communities as
    watchdogs over loggers.

30
Policy Analysis / Development Model /
Framework
Data Analysis
Policy Antecedent
Policy Recommendation
Policy Issue/ Analysis
Performance Data
31
The Key to Successful Policy/Formulation is
the definition of objectives yet there is
nothing resembling agreement on this central
issue, either in terms of ends or means. Peter
de Leon (1987)
32
Job of Policy Analysts (Nelson, 1991)
  • Persuade decision makers not by
  • asking them to trust your professional
  • authority but by
  • the ability to draw convincing historical
    analogies
  • taking diverse events and integrate them into a
    big picture

33
cont. Job of Policy Analysts
  • showing that policy proposals make sense
    political, moral, legal, philosophical and other
    perspectives
  • finding simple statistics and data that make a
    point and
  • Convert broad policy principles into feasible
    short-term measures that over time will serve to
    implement these principles

34
Practical Principles for Policy Analysts
  • Learn to focus quickly on the central decision
    criteria of the problem.
  • Avoid the tool box approach to analyzing policy.
  • Learn to deal with uncertainty.
  • Say it with numbers and/or figures.
  • Make the analysis simple and transparent.

35
cont. Practical Principles for Policy Analysts
  • 6. Check the facts.
  • 7. Learn to advocate the position of others.
  • 8. Give client analysis, not decisions
  • 9. Push boundaries beyond of analysis beyond
  • policy envelope
  • 10. Be aware that there is no such thing as an
  • absolutely correct, rational and complete
  • analysis.

36
Stages of Policy Analysis Process
  • 1. Problem definition

37
Stages of Policy Analysis Process
  • 2. Goal/objective setting.

38
Stages of Policy Analysis Process
  • 3. Framework/hypothesis.

39
Stages of Policy Analysis Process
  • 4. Determination of evaluation
    criteria.

40
Stages of Policy Analysis Process
  • 5. Identification of alternatives.

41
Stages of Policy Analysis Process
  • 6. Evaluation of alternatives.

42
Stages of Policy Analysis Process
  • 7. Comparison of alternatives.

43
Stages of Policy Analysis Process
  • 8. Assessment of outcomes.

44
Stages of Policy Analysis Process
  • 1. Problem definition
  • 2. Goal/objective setting
  • 3. Framework/hypothesis
  • 4. Determination of evaluation criteria
  • 5. Identification of alternatives
  • 6. Evaluation of alternatives
  • 7. Comparison of alternatives
  • 8. Assessment of outcomes

45
Rules to Help Select Methods of Analysis
  • Be guided by what your client wants to know.
  • Time you have been given to do the analysis.
  • Knowledge of factors affecting the policy
    decision.
  • Complexity of the issue

46
cont. Rules to Help Select Methods of Analysis
  • 5. Data that is available.
  • 6. Do you need a position or actual
  • numbers or both?

47
Goal Definition
  • An object or end that one strives to attain aim
  • Objective Definition
  • Something aimed at or striven for
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