into a dummy of bribe request. Second, we assess if a bribe has likely been paid by the firm. We measure the likelihood for a firm of paying a bribe using as a proxy the perception of a respondent about the percentage of annual sales other firms in the same line of business pay in bribes to "get things done".<sup>13</sup> To the extent that this self-reported estimate is a good proxy for firm’s likelihood to pay bribes and correlates with actual bribe payments, it allows accounting for incidence of bribe payment.<sup>14</sup> Within our sample, 33% of the firms declare having been expected/requested by government officials to make an informal payment in at least one of their dealings with public officials and 41% of the firms report positive informal payments to public officials to "get things done".

– Using these two dichotomic variables bribe request and bribe payment– we divide firms’ bribe payment behavior into four categories, as presented in Table 1. Bribe-paying firms are separated into those reporting providing bribes in presence of a request by public officials, labeled as "demand side" bribe payers. Firms that report bribe payments without having received a request labeled as "supply side" bribe payers. We similarly divide the non-paying firms into two categories, those that received a bribe solicitation and did not acquiesce, labeled as "incorruptible," and those that report neither receiving nor paying bribes, labeled as "non-bribe payers." Table 1: Firms’ bribe payment behavior

|||Bri|be paid|
|---|---|---|---|
|||Yes|No|
||Yes|Demand side|Incorruptible|
|Bribe requested||||
||No|Supply side|Non bribe payers|

More formally, the demand side of corruption is captured by a dummy variable, _Demand_ , which takes the value of 1 if a firm reports spending a positive share of its annual sales to

> 13The question is as follows: "We’ve heard that establishments are sometimes required to make gifts or informal payments to public officials to get things done with regard to customs, taxes, licenses, regulations, services, etc. On average, what percent of total annual sales, or estimated total annual value, do establishments like this one pay in informal payments or gifts to public officials for this purpose?"

> 14Despite that the question is asked indirectly, like most research on bribery, we interpret the answer as if they reflected respondents’ own experience of corruption instead of the average experience of firms in their sector, as the question reads. Asking sensitive questions indirectly is often thought to help decrease under-reporting by allowing managers to admit to paying bribes without incriminating themselves. Using indirect wording in questions about bribery is now standard practice in firm-level surveys. Despite the literal wording of the question which refers to firms like in theirs in their sector, indirect questions about corruption have been interpreted as reflecting respondent’s own experience of corruption. Svensson (2003) for instance looked for correlates between the probability of firms reporting a positive amount of bribes and firm’s own characteristics using an indirect question asking Ugandan firms to estimate how much bribes firms similar to theirs "typically pay each year". Similarly, Alm et al. (2016) and Freund et al. (2015) makes use of these questions.

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