and Murrell 2015). The third is completely intuitive: the guilty may very well have more incentive to behave reticently.

There are five parameters in our model: the probabilities of (i) receiving a visit, (ii) being reticent, (iii) behaving reticently on a given question, (iv) being guilty if reticent, and (v) being guilty if candid. We make the identifying assumption that the answers to all questions—CQs and RRQs—can be modeled using the same parameter values. This is a strong assumption, but all approaches to using survey data in the face of reticence would need to make some such assumptions. In Appendix B, we review some literature relevant to this assumption and present results that show that our general conclusions are robust to violations of this assumption.

Reticence is an individual-specific trait, with respondents being reticent or candid with probabilities and . Candid respondents are always honest. However, with probability , reticent respondents choose to behave reticently on any given sensitive question—that is, they answer in a way rr 1 −rr qq that obscures any possible inference of guilt. Sometimes, however, reticent respondents behave candidly, and provide honest answers with probability . We assume that the decision to behave reticently on the two-step CQ is made once, and is independent of the similar decisions on the 1 −qq< 1 RRQs. Notice that this set-up makes a distinction between reticence and behaving reticently: reticence is a fixed trait for a single individual, but any reticent individual sometimes behaves reticently and sometimes candidly across different questions. Tax officials visit or inspect businesses with probability .<sup>11</sup> We differentiate between two classes of businesses in order to allow for the possibility that guilt and reticence are correlated across ww respondents. First, businesses asked for a bribe with probability have reticent respondents. Second, those asked for a bribe with probability ( ) have candid respondents. A less than 0 ≤gg≤1 one induces the correlation between reticent behavior and guilt. However, our estimation procedure kkgg 0 ≤kk≤1 kk does not preclude as a special case. We can therefore test whether, in fact, the guilty are more likely to give dishonest responses. kk= 1

# _3.1 Modeling Responses to the Conventional Question_

In this subsection we develop two alternative models of how reticent behavior affects the interview process for the two-step CQ, a boiled-down version of which is "(1) was your firm visited by tax officials and (2) if yes, did they expect an informal payment?". Importantly, if no visit is acknowledged in the first step, no bribe question is asked in the second step. This means that reticent respondents can avoid the bribe question, if they so choose, by denying that a visit occurred. Thus, in contrast with Kraay and Murrell (2015), we must not only decide how to model reticent behavior, but also specify which parts of the two-step CQ are affected by reticent behavior.

> 11 It is of course plausible that businesses of different characteristics (size, activity, etc.) have different probabilities of getting a visit or inspection by tax officials. However, we do not model tax officials’ choices here.

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