**Discouraged Indicator = f** _(User Characteristics, Governance Characteristics)_ **= f** _(Income, Education, Age, Gender, Governance Characteristics)_

We are aware that the relationship between access and poor governance is more complex than our specification suggests and may be tinted by endogeneity and omitted variable bias. At the estimation stage, we discuss this possibility and introduce alternative specifications to reduce the potential biases.

The next sections introduce the data used and descriptive statistics, setting the stage for the discussion of the empirical model and results in Sections 5 and 6 respectively. The agency-level analysis is introduced and discussed in detail in Section 7.

# **3. DESCRIPTION OF THE DATA**

We use country-specific data from two in-depth surveys: household and public official surveys. The data were collected through an in-depth governance assessment carried out in Peru, between February and March 2001, and covers over 1696 households and 1123 public officials<sup>8</sup> . Households were surveyed in their roles as users of public services, and were asked about the quality of public agencies and their experience with inappropriate procedures and behavior. The public official survey provides a wide range of information about governance, corruption and service delivery across 61 key institutions in the country. A similar survey was conducted for private enterprises, though this information is not used in this paper.

We choose two complementing units of observation for our empirical exploration: the household level and the public agency level. The household level analysis constitutes the core analysis of the paper. We use the household data to construct a set of household’s characteristics and ‘governance’ features that may explain the individual’s decision not to use a public service when needed. We complement the household analysis with a public-agency level analysis. This alternative level of analysis – the agency – aims to provide a supply side view of the issue of access to services. At the public-agency level, we use information on access to public services and quality of governance as reported by public officials.

The household level analysis is based on information on 1696 Peruvian households. The unit of observation is the individual household _i_ . For each individual we know her/his characteristics, her/his assessment on selected governance issues and the number of public services needed but not sought. Working at the individual level allows us to identify, on the one hand, the relevant household characteristics (income, education, sex and age of the head of the household) that may affect the decision of whether or not to seek a public service when need it. At the same time, it permits us to explore the effect that the quality of governance may have on the household’s decision to seek or not a public service.

We focus on a few survey questions that can proxy for the quality of governance at the household’s level: the perceived honesty/dishonesty of public institutions, the degree of

> 8 For more details on the Survey used, please see the WBI report prepared at the request of the Peru Government, “Voices of the Misgoverned and Misruled: An empirical Study on Governance, Rule of Law and Corruption”, September 2002. <u>http://www.worldbank.org/wbi/governance/peru/results.html#reports</u>

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