(2006) suggest that differences in survey design and technique account for the difference in estimates of corrupt payments between 10.5 percent of costs found in their survey of Indonesian firms and 3 percent of profits found by the Indonesian Annual Survey of Medium and Large Enterprises. The problem of accuracy may be magnified when questions are less specific, or asked about ‘firms like yours,’ or levels of corruption in general.

The BEEPS survey data allows us to see how significant such issues of interpretation, specificity and insufficient knowledge might be, even in perhaps the strongest survey that covers corruption issues. The survey asks for the percentage of firm sales to the state sector and the unofficial payments made by firms in that industry to secure government contracts as a percentage of government contract values. The product of these two responses should be a reasonable indicator of respondent estimates of the percentage of total revenues paid in unofficial payments to secure government contracts for firms like theirs. The survey also asks for the percentage of total revenues accounted for by all unofficial payments and the percentage of those unofficial payments which are used to secure government contracts. The product of these two responses should also be a reasonable indicator of respondent estimates of the percentage of total revenues paid in unofficial payments to secure government contracts for firms like theirs. One would hope that these two different measures would be approximately equal: (bribes for government contracts as a percentage of revenues) ≈ (percentage of firm sales to state) * (percentage of government contract values paid in bribes) ≈ (percentage of revenues paid in bribes) * (percentage of bribes paid to secure government contracts) Answers to the questions regarding total revenues accounted for by all unofficial payments and unofficial payments on government contracts as a percentage contracts were both measured in bands in the 1999 survey (0%, 0%<>1% and so on).<sup>15</sup> In order to perform analysis we take the response as equal to the midpoint of the band. In the case of the last indicator in both cases (>25%) the answer is assumed to be 35%. This will create noise in the estimates, a subject returned to below. There are 297 firms from the BEEPS database with the requisite data and more than 25 percent of sales to government (such firms should be better informed about the size and extent of bribery for contracting with government). This provides us with two estimates from the same firm of total payments to secure government contracts as a percentage of revenue.

A simple regression takes the product of percentage of total revenues in unofficial payments multiplied by percentage of unofficial payments to secure government contracts as the dependent variable and the product of percentage of contracts in bribes multiplied by percentage of sales to government as the independent variable. If respondents were answering consistently based on accurate knowledge of firm revenues and levels of corruption, we would expect a coefficient of one, an R-squared close to one and an intercept near zero. In fact, the independent variable enters highly significantly,

> 15 This has changed in subsequent versions of BEEPS.

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