institutions are most affected by corruption (opinion of a respondent); which spheres of life does corruption affect most (opinion of a respondent); how is corruption evolving over time (opinion of a respondent); how frequently do people bribe (real facts from a respondent’s life); how much does it cost (real facts from a respondent’s life); what form does bribery take (real facts from a respondent’s life).

Two measures of corruption that we use - paid bribe and bribe burden - utilize a respondent’s answers about real facts from his/her life. For the first measure, a respondent is asked if he/she paid bribe during last 12 months. For the second measure, the question is what was the amount of all bribes paid.<sup>8</sup> The survey was completely anonymous, and the rate of non-response on these questions is relatively low (3.3% for paid bribe, 6.8% for bribe burden). Therefore, these measures provide more or less objective assessments of corruption (at least, of petty corruption) level among households in a country: the former one estimates the frequency of the bribery, while the latter one estimates its burden in terms of GDP.

To capture the extent of corruption in the business world we utilize the World Bank Enterprises Surveys dataset. WBES is a survey of firms from different sectors of economy (services, manufacturing, construction, etc.) with number of official employees more than 5. It is conducted annually in developing and countries in transition (regular survey are being conducted since 2002). The questions that the representatives of the firms are asked during an interview pertain to the firm’s general characteristics and financial indicators, the investment climate in a country, where they operate, the state of infrastructure, labor market, degree of competition, etc. The separate group of questions concerns business-government relations. This group contains several questions about bribing governmental officials: are there any informal gifts or payments expected or requested during certain kinds of interaction between a firm and a government official (e.g. tax inspections, obtaining operating or import license, etc.); what percentage of annual sales goes to such gifts and payments; does a firm try to secure a contract with a government, and what percentage of its value is paid back to government officials. All these questions concern real experience that a firm had with a government.

We use two main measures of corruption from WBES. The first one - informal gift - captures frequency of bribery among the businesses in a country. informal gift is equal to 1 if a responded told that an informal gift or payment was expected or requested when the firm dealt with tax inspections, or operating licenses, or import licenses. The second measure of corruption - bribe%sales - captures the burden of bribery on a firm. It is equal to the percentage of annual sales that the firm spends on informal gifts to ”get things done” with the government. This figure is directly asked about in the survey. Similary to TI GCB, WBES is a completely anonymous survey, and the rate of non-responce to the questions of our interest is quite low: less than 3% for bribe%sales, and less than 2% for informal gift. Therefore, these measures quite credibly reflect the situation with corruption among businesses in a country.

As an alternative to our ”objective” (or ”factual”) measures of corruption, we also use a measure, which is opinion-based. It is corruption perception - Transparency International’s Corruption Transparency Index, which does not need intro-

> 8We then take this amount as a percentage of country’s GDP per capita

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