Distinguish between impact and incidence

Impact and incidence are terms often used in economics and social sciences to describe different aspects of the effects of policies, events, or phenomena:

1. Impact:

   • Definition: Impact refers to the direct effect or consequence of a policy, event, or action on various economic agents or social groups.
   • Focus: It focuses on the immediate or primary effects of a policy or event.
   • Measurement: Impact can be measured in terms of changes in economic variables such as prices, quantities, incomes, employment levels, or social indicators like poverty rates, educational attainment, or health outcomes.
   • Example: If the government imposes a tax on cigarettes, the impact might be seen in higher prices for cigarettes, changes in consumer behavior, and revenue generated for the government.

2. Incidence:

   • Definition: Incidence refers to the distribution or allocation of the costs or benefits of a policy, event, or action among different economic agents or social groups.
   • Focus: It focuses on who bears the burden or enjoys the benefits of a policy or event.
   • Measurement: Incidence analysis seeks to identify how the costs or benefits of a policy are distributed across various stakeholders, such as producers, consumers, workers, taxpayers, or specific demographic groups.
   • Example: In the case of a cigarette tax, the incidence analysis might examine whether the burden of the tax falls more heavily on consumers (through higher prices) or producers (through lower sales), and how this burden is distributed across different income groups.

In summary, impact refers to the direct effects of a policy or event, while incidence focuses on who bears the costs or enjoys the benefits of those effects. While impact analysis assesses the magnitude and nature of changes resulting from a policy, incidence analysis investigates the distributional consequences of those changes among different stakeholders. Both impact and incidence analyses are important tools for policymakers and researchers to understand the full implications of economic policies and events.