6.5 Structural Impacts

In addition to distributional impacts, a regulation may result in fundamental changes in more aggregate macroeconomic variables such as trade, innovation, inflation, and employment. EO 12866 explicitly calls for an analysis of productivity, employment, and competitiveness impacts as part of the assessment of the potential costs of a regulatory action. Likewise, the written statement prepared pursuant to UMRA must include an assessment of the impact of a regulation "on the national economy, such as the effect on productivity, economic growth, full employment, creation of productive jobs, and international competitiveness of United States goods and services." The assessment must be performed "to the extent that the agency in its sole discretion determines that accurate estimates are reasonably feasible and that such effect is relevant and material" (UMRA, Section 202(a)). A memorandum to the heads of executive departments and agencies from OMB ( Katzen, 1995) provides further guidance for analyzing structural impacts under UMRA.

Unlike distributional impacts, structural impacts require more than simply disaggregating benefits and costs to determine their effect on different segments of society. Instead, an analysis of structural impacts usually requires that the analyst trace the effects of a regulation beyond the market or economic sector in which they directly occur to determine the impact on the economy as a whole.

Analyses of structural impacts often require either multiple partial equilibrium analyses or some form of general equilibrium analysis. Because computing benefits and costs in multiple markets can significantly raise the cost of analysis, the analyst should first informally assess whether the rule is likely to have macroeconomic impacts. This will generally depend on the size of the affected industry and whether it engages in international trade. If the informal assessment reveals that such impacts are likely, the analyst should consult ISEG management about how best to apply time and resources to such an analysis.

6 Impact Analyses

6.0 Intro

6.1 The Unfunded
   Mandates Reform
   Act (UMRA)

6.2 Regulatory
   Flexibility Act
   (RFA) and Small
   Business Regul-
   atory Enforce-
   ment Fairness
   Act (SBREFA)

6.3 The Paperwork
   Reduction Act
   (PRA)

6.4 Distributional
   Impacts

6.5 Structural
   Impacts

__________________

10 This memo does, however, contain an error of which ISEG analysts should be aware. The memo notes that macroeconomic impacts are measurable only if the impact of the rule exceeds 0.25 to 0.5 percent of gross domestic product and indicates that this range is equal to $1.5 billion to $3 billion. GDP in 1997 totaled approximately $8.1 trillion. Therefore, 0.25 percent to 0.5 percent of GDP would total approximately $20 billion to $40 billion. It is not clear whether the percentages or the dollar amounts are in error. Therefore, ISEG analysts should use caution when using the guidance provided in this memo.

6.5 Structural Impacts

6 Impact Analyses

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