Use Of Economic Analysis Research Articles

ONE LUMP OR TWO: UNITARY VERSUS BIFURCATED MEASURES OF INJURY AT THE USITC

I. INTRODUCTION Firms that face competition frequently have a number of legal avenues to limit such competition. When such competition comes from overseas competitors, they might avail themselves of laws to limit imports. In the major industrialized countries, laws to limit competition from imports fall into two broad categories: safeguards and laws against unfairly traded imports. Safeguards, also known as escape clause procedures, allow a World Trade Organization (WTO) member state to temporarily restrict imports when a product is imported to its territory in such increased quantities as to cause or threaten serious injury to competing domestic producers. These temporary restrictions (quotas or tariffs) can either allow the domestic industry to become more competitive or allow an orderly transfer of resources from the industry. Unfairly traded imports are imports that are subsidized and/or dumped, that is, sold at less than fair value. Fair value can be the price that the imports are sold for in their home market, the price that the imports are sold for in a third country, or the estimated cost of production including a profit. In accordance with international agreements, U.S. law requires that remedial duties (antidumping duties or countervailing duties) can only be imposed on unfairly traded imports if these imports have caused (or threaten to cause) material injury to competing domestic producers. The U.S. International Trade Commission (USITC) is responsible for investigating and determining whether unfairly traded imports have caused material injury to a domestic industry. The USITC is also responsible for investigating and determining whether a domestic industry that petitions for relief in a safeguard proceeding has suffered serious injury because of increased imports. USITC commissioners have adopted a variety of approaches to determining whether dumped or subsidized imports have caused material injury to competing domestic producers. An important one that has been used by several commissioners is the unitary approach. This approach uses production and prices for the unfairly traded imports, the domestic industry, and fairly traded imports (if any), estimates of demand and supply elasticities, and dumping or subsidy margins to calculate what the performance of the domestic industry would have been had it not had to compete with unfairly traded imports. An alternative approach that has been adopted by more commissioners is the bifurcated approach. This approach first asks if the domestic industry has suffered material injury and then asks whether unfairly traded imports contributed to this injury. By separating the injury determination into two separate questions, the presence of injury and the causation of injury, the bifurcated approach is similar to the sort of inquiry that the USITC conducts in its safeguards investigations. Commissioners who used the unitary approach relied on an explicit economic model to compare actual domestic industry performance with what the performance would have been absent competition from unfairly traded imports. In contrast, commissioners who used the bifurcated approach rejected formal economic analysis; in fact, many of them were openly hostile to the use of economic analysis. Because of these different attitudes toward quantitative economics, the unitary approach has also been called the economic approach. We adapt an economic model developed to measure the causes of injury in USITC safeguard investigations to measure the effect of unfairly traded imports to domestic industry performance, that is, the second question under the bifurcated approach. We apply this methodology to all USITC unfairly traded import investigations for a time period between two major changes in the law; during this period there were commissioners who used the unitary approach and commissioners who used the bifurcated approach. …

How should cost-effectiveness analysis be used in health technology coverage decisions? Evidence from the National Institute for Health and Clinical Excellence approach

In the National Health Service in England and Wales, technology coverage decisions are taken by the National Institute for Health and Clinical Excellence (NICE). The intention formally to apply cost-effectiveness analysis to the decision-making process distinguishes NICE from most other bodies making similar policy recommendations. We carried out a case study of the NICE Appraisals Committee to explore the influence and use of economic evaluation in the decision-making process. Qualitative case study methodology. This involved analysis of all relevant secondary sources, observations of Appraisals Committee deliberations and interviews with a cross-section of Committee members. Economic evaluation is integrated into the Committee's work. There are two main ways in which the use of economic analysis is understood by Committee members: an ordinal approach, whereby cost-effectiveness is only considered if the technology has passed a clinical effectiveness hurdle; and a framework approach, whereby the economic evaluation and model provide a structure for considering the decision problem and the evidence. These two approaches appear to operate simultaneously but are, in essence, inconsistent. The NICE 'experiment' has seen cost-effectiveness analysis move to the centre-ground of UK national policy deliberations regarding technology coverage. However, our case study implies that there may be room for further refinement of the appraisal process in order to resolve the observed tension between two different ways of incorporating cost-effectiveness analysis in NICE's decision-making.

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

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.

Water accounting in Australia

This paper introduces water accounting as produced by the Australian Bureau of Statistics (ABS). It provides information about the ABS Water Accounts and highlights the many other organisations involved in the provision and use of water related data in Australia. The ABS Water Accounts have built upon previous reports on Australian water resources and the System of Environment and Economic Accounting [UN (United Nations) 2003. Draft Handbook Integrated Environmental and Economic Accounting. Studies in Methods, Series F, No. 61, Rev. 1. United Nations, European Commission, International Monetary Fund, Organisation for Economic Cooperation and Development, World Bank. New York.]. Information from the ABS Water Accounts is presented along with examples of their use in economic analyses designed to inform public debate and government decision-makers. A key feature of the Australian environment is that water is relatively scarce when compared with other inhabited continents. Rainfall displays a high level of spatial and temporal variability and droughts are common. In 2004 an Intergovernmental Agreement on a National Water Initiative (NWI) was reached by Australia's national and eight state and territory governments. The NWI aims to address environmental, economic and social concerns about the current and future state of Australia's water resources. The NWI specifically calls for the preparation of annual water accounts, which clearly indicates the expected usefulness of national and regional water accounts.

The Problem of Social Cost in a Genetically Modified Age

Genetically modified pollen drifting onto the field of a neighboring farm may cause substantial harm. If the bystanding farmer is growing non-genetically modified crops, she may suffer a pecuniary loss due to genetic pollution. If the pollen is patented, the patentee may also claim harm stemming from the unauthorized distribution of its proprietary genetic material. Disputes arising from pollen drift present classic legal questions arising under the law of neighbors and classic economic questions broached most famously by Ronald Coase in his essay on The Problem of Social Cost. The application of the Coase Theorem and its most applicable corollary strongly suggest that: 1) balancing rules under nuisance law should be applied on a case-by-case basis to determine whether any particular genetic polluter should be liable for damages caused by pollen drift; and 2) most bystanding farmers should have viable defenses to patent infringement. Venerable legal principles applied to this new problem suggest the same two conclusions. Proving both propositions provides a textbook demonstration for the usefulness of economic analysis and solves a world-wide multi-billion dollar legal problem.

Introduction to the Political Economy of Environmental Regulation

This paper introduces a volume of collected papers on the political economy of environmental regulation: economic analyses of the processes through which political decisions regarding environmental regulation are made, principally in the institutional context found in the United States. Despite this geographic focus, many of the papers contain analytical models that are methodologically of interest and/or have lessons that are relevant in other parts of the world. In the environmental realm, questions of political economy emerge along three fundamental dimensions, which are closely interrelated but conceptually distinct: (1) the degree of government activity; (2) the form of government activity; and (3) the level of government that has responsibility. The first three parts of the book deal respectively with these three fundamental dimensions of inquiry. Part I features a set of six articles that examine how the targets and goals of individual environmental policies are established. Part II brings together nine articles that employ the analytical apparatus of positive political economy to address questions related to the choice of policy instruments for environmental regulation. Part III features four articles that examine, both positively and normatively, the level of government that is delegated responsibility for environmental protection. Finally, in Part IV, three articles are featured that assess the use of economic analysis in contemporary environmental policy.

Cows are Better than Condos, or How Economists Help Solve Environmental Problems

This essay explores three case studies that illustrate the exemplary use of economic analysis in environmental decision-making. These include: 1) the creation of a market in tradable grazing rights in the American West; 2) a cost analysis that facilitated a negotiated rulemaking at a power plant in Arizona; and 3) a conception of production-based pollution allowances that led to an agreement for regulating Intel microprocessor production plants. The paper argues that cost–benefit analysis may be less useful than other kinds of economic analysis that can guide and inform rather than judge and second-guess the outcome of negotiated and collaborative decision-making.

Cows are Better than Condos, or How Economists Help Solve Environmental Problems

This essay explores three case studies that illustrate the exemplary use of economic analysis in environmental decision-making. These include: 1) the creation of a market in tradable grazing rights in the American West; 2) a cost analysis that facilitated a negotiated rulemaking at a power plant in Arizona; and 3) a conception of production-based pollution allowances that led to an agreement for regulating Intel microprocessor production plants. The paper argues that cost–benefit analysis may be less useful than other kinds of economic analysis that can guide and inform rather than judge and second-guess the outcome of negotiated and collaborative decision-making.

The development and use of quality-of-life measures to evaluate health outcomes in Japan.

Health outcomes measurement forms a key aspect of data collection for economic evaluations. Quality-of-life instruments provide a measure of patient-focused health outcomes. Such instruments, including the EuroQoL questionnaire (EQ-5D) and the Short-form 36 (SF-36) are already being used in Japan. Utility instruments provide an alternative way of measuring quality of life for use in economic analyses. At present, utility measurement in Japan is limited to scores derived from the EQ-5D. Although the SF-36 was designed as a health profile measure, it has since been tested for use as a utility measure, with valuation of items now being undertaken in Japan. Utility measurement in Japan is likely to be advanced further by the validation and introduction of the Health Utilities Index. The experiences of other countries provide the opportunity for Japan to learn how utility scores may be used in cost-utility analyses of healthcare technologies.

Twenty years of health care economic analysis in Spain: are we doing well?

The rising demand for health care, together with the scarce available resources, has increased the use of economic analysis as a support tool for policy making. The objective of this study was to make a description of economic evaluation studies carried out in Spain and published during the last 20 years, and to assess their quality. A systematic bibliographic search was made in the main biomedical databases. Full economic evaluation studies made in Spain comparing two or more health care alternatives were included. Statistical analyses included a descriptive analysis, the assessment of the association between pairs of variables, and a homogeneity analysis. A total of 87 studies were included in the review. According to the methodology, the technique most frequently used was cost-effectiveness analysis. In most cases, some weaknesses could be pointed out: absence of any objective directly linked to the decision-making process, a non-explicit perspective, no inclusion of indirect costs, or clinical and economical data not concurrently collected. A continuing challenge for health care economic analysis in Spain is to follow methodological guidelines and reporting conventions, to improve the dissemination of research, as well as to use more sophisticated economic analysis techniques, and to publish in international journals.

The Role of the Food and Drug Administration in Pharmacoeconomic Evaluation During the Drug Development Process

Economic analysis is increasingly being integrated into Phase III clinical trials. In 1995, the Clinical Economics Research Unit of Georgetown University Medical Center implemented a survey to assess the use of pharmacoeconomic data in the clinical development process. This survey gathered information regarding the companies’ use of economic analyses in the drug approval process and the analyses commented upon by the Food and Drug Administration (FDA) in its review (17). The results from the 1995 survey found that companies reported that pharmacoeconomic data were increasingly being submitted to the FDA in product approval packages, and that the FDA increasingly commented on these data. Given the growth of interest in economic evaluation since 1995, the survey was re-implemented in 1998 to examine the current state of the art in economic evaluation. The results indicate continuing and expanding interest in submitting pharmacoeconomic data to the FDA during the drug development process and reports of recent approval of economic claims in product labeling.

Economic Reasoning and the Framing of Contract Law : Sale of an Asset of Uncertain Value

By analyzing two American contract law decisions, the paper illustrates the usefulness of economic analysis in framing the inquiry. The cases have a common feature, unrecognized by the courts : they both deal with the production and transfer of information regarding the sale of an asset of uncertain value. One involves the combination of an option and a lockup to encourage the buyer to produce information. The other involves contingent compensation to convey the seller's assurance of the quality of the assets. Once this is recognized, the outcomes are straightforward.

Biostatistical aspects of outcome evaluation using TISS-28.

Quantification of therapeutic activities using the Therapeutic Intervention Scoring System (TISS) is an alternative approach to evaluate outcome of patients in intensive care. The reason for using cumulative TISS points is to integrate various adverse events (except mortality) according to the amount of therapeutic effort that they require. The reduced version of TISS with 28 items (TISS-28) allows a reliable assessment of therapeutic activities with limited observer variation, provided that an exact description of all items is given. Measurements can be validated by correlations with established severity of -disease classification systems such as APACHE II. Cumulative TISS-28 values correlate well with length of ICU stay (r = 0.98). On average, 27.2 points/day can be expected in an unselected mixed surgical ICU. Those who die can be included in non-parametric analyses of cumulative TISS values by allocation of arbitrary high values. Quantification of therapeutic interventions is a sensitive measure of outcome in patients who require intensive care but have a low risk of mortality. The usefulness of economic analysis further supports its clinical application.

Government Analysis Of The Benefits And Costs Of Regulation

Expenditures incurred because of federal environmental, health, and safety regulation have grown dramatically in recent decades, and now total several hundred billion dollars annually. These costs appear likely to increase significantly in the next decade, as well. Yet the economic impacts of regulation receive much less scrutiny than direct, budgeted government spending. The potential gains of regulatory reform are substantial. Research suggests that more than half of the federal government's regulations would fail a strict benefit-cost test using the government's own numbers (Hahn, 1998). There is ample research suggesting that regulation could be significantly improved, so that we could save more lives with fewer resources (Morrall, 1986; Viscusi, 1996). One study found that a reallocation of mandated expenditures toward those regulations with the highest payoff to society could save as many as 60,000 more lives a year at no additional cost (Tengs and Graham, 1996). Recently, Congress has begun to show a greater interest in assessing the economic impact of regulation. In 1996, Senator Ted Stevens of Alaska added an amendment to the Omnibus Consolidated Appropriations Act of 1997 that required the director of the Office of Management and Budget (OMB) to provide Congress with estimates of the total annual benefits and costs of all federal regulatory programs and estimates of the benefits and costs of individual regulations. This statute was the first to mandate such an accounting. In September 1997, the OMB produced its first report on the benefits and costs of regulation in response to the Stevens amendment, and it recently completed a second report in the fall of 1998. At this point it is not clear whether Congress will require additional reports. This essay reviews the increasing use of economic analysis in regulatory decision-making, assesses the first OMB report, and considers how the use of economic analysis can help to inform regulatory decision-making.

Policy Watch: Government Analysis of the Benefits and Costs of Regulation

Recently, Congress has shown a greater interest in assessing the economic impact of regulation. This interest was driven in part by estimates that federal regulation costs several hundred billion dollars annually. In 1996, Congress required the director of the Office of Management and Budget to provide estimates of the total annual benefits and costs of individual regulations. This essay reviews the increasing use of economic analysis in regulatory decisionmaking, critically assesses the first 0MB report, and considers how the use of economic analysis can help inform regulatory decisionmaking. It argues that policymakers need to address a growing body of evidence that casts doubt on the effectiveness and efficiency of much regulation.

Perspectives on the Conduct and Use of Economic Analysis in Federal Environmental Decisionmaking

This article lays out the broad rationale for conducting economic analyses of major environmental regulations—principally, benefit-cost analysis—as well as some of the pertinent critiques. What can public agencies expect to gain from such activities? What are the reasons to be wary of the results? The paper reviews the recent experience of the federal government in conducting such analyses, with particular reference to the relevant Presidential Executive Orders issued over the past three decades. Finally, the paper examines some of the key methodological issues, often involving interdiscripliary topics, critical to the conduct of such analyses. Overall, it is concluded that the economic analysis of proposed environmental regulations can help improve the allocation of society's resources while at the same time engendering an understanding of who benefits and who pays for any given regulatory action. Additionally, properly conducted economic analyses encourage transparency and accountability in the decisionmaking process, provide a framework for consistent data collection and identification of gaps in knowledge, and allow for the aggregation of many dissimilar effects (e.g., those on health, visibility, and crops) into one measure of net benefits expressed in a single currency.

Bringing ecological economics out of the wilderness

This paper provides a brief look at the state of the art of use of economics in the designation and management of protected areas in Australia. To date, the formal use of economic analysis in making decisions concerning protected areas has been limited and ad hoc. This is illustrated for two of Australia's premier protected areas, the Great Barrier Reef Marine Park and the Wet Tropics World Heritage Area. It is argued that economic analysis can play a part in making policy on allocation of land to protected areas, and in the management of such areas. Based on experience to date, suggestions are offered for the future use of ecological economics in allocating and managing protected areas.

Is there a role for benefit-cost analysis in environmental, health, and safety regulation?

The growing impact of regulations on the economy has led both Congress and the Administration to search for new ways of reforming the regulatory process. Many of these initiatives call for greater reliance on the use of economic analysis in the development and evaluation of regulations. One specific approach being advocated is benefit-cost analysis, an economic tool for comparing the desirable and undesirable impacts of proposed policies.

C20. Willingness to pay to avoid minor postanesthetic symptoms

Pharmacologic adjuvants and alternative anesthetic techniques can decrease the incidence of postanesthetic minor symptoms but may also be associated with morbidity and increased costs. What concerns patients? What do patients want? In an imperfect world in which some morbidity may be unavoidable and cost is a growing concern, this study assessed the preferences of would-be patients for immediate postanesthetic recovery. The goal of this study was to assist in planning anesthesia care more satisfying to patients. Individual decision making of 79 subjects was studied using conjoint analysis, a multivariate statistical technique that determines the relative importance (utility) of decision attributes (factors) at different severities (levels) and the way they are used in actual decisions. Subjects ranked 16 highly structured scenarios presenting, according to a fractional factorial design, presence/absence of minor symptoms at several severities as well as willingness to pay specified additional out-of-pocket amounts ($0.00, $15.00, $35.00, $50.00) beyond that paid by health insurance. Four additional “holdout” scenarios, not used in model estimation, were used to validate the model. Preferences differed little by subject’s sex, age, job category, or prior anesthesia. Three quarters of subjects based their decision making primarily on whether emetic symptoms were present and were willing to accept a variety of trade-offs (eg, other symptoms, increased cost) to avoid such distress. Generally, subjects were willing to pay $15.00 to avoid any given symptom and $50.00 to avoid emetic ones; these amounts approximate the incremental costs of pharmacologic, prophylactic, and therapeutic agents, as well as alternative anesthetic techniques. Conjoint analysis appears useful in obtaining meaningful willingness-to-pay estimates for use in economic analyses.

Response: The Use of Economic Analysis in Public Policy

Morales and colleagues deserve credit for extending traditional economic analysis by using anthropological field data and applying midlevel economic tools to policy analysis. However, their analysis is problematic because it exaggerates how many benefits would be lost if the Maxwell Street Market were moved, ignores the costs imposed by the market, and does not consider the economic benefits of the university's proposed land use. Even very moderate success of the university's plans will more than compensate for the economic losses caused by the market's move. It was politically impossible for the university to implement its expansion plans while maintaining the market. Such difficult choices inevitably arise in a complex urban environment. Cost-benefit analysis is a useful tool, but provides only some of the information that enters into the decision-making process. Thus analysts must be modest in the claims they make for the policy relevance of their data.