A related approach looks at levels of outputs compared to inputs in construction. Regarding grand corruption at the local level in infrastructure, Olken (2006) used measures of reported physical inputs and costs, surveyed labor inputs and costs and physical audits of outputs to determine that about 24 percent of expenditures in an Indonesian road-construction project were ‘lost.’ Canning and Fay (1996) report variations in the cost of construction of a kilometer of similar road that vary by as much as five to ten times. Much of this will be due to differences from factors including location, some will also be due to less efficient, more corrupt procurement practices. The ongoing World Bank effort to build a database of road construction and rehabilitation costs should help to provide benchmarks against which to estimate excess costs of construction.<sup>7</sup> Public expenditure tracking surveys (which track the flow of resources through layers of government bureaucracy) are a potential approach to measuring the misappropriation of government funds if combined with unit-cost and quality of service data on final outputs. They have primarily been used in social sectors to date. These surveys have found significant leakage of funds --between 30 and 76 percent of nonwage funds going to primary education in African countries, for example (Reinikka and Svensson, 2005). A similar approach will be trialed by the World Bank in the water sector this year.

There are a number of different ways to attempt to measure infrastructure corruption and its impact, then. Results to date suggest that corruption in construction and connections may both be widespread. The average firm in BEEPS survey countries in 1999 was spending perhaps 0.1-0.2 percent of revenues for unofficial payments to get utility connections, and corrupt payments to gain government contracts in construction appear to be frequent. Although their scale is uncertain, anecdotal evidence suggests that 5 to 10 percent of contract values may be a not unreasonable estimate in some countries. Direct physical audits point to significant corruption in Indonesian roads projects adding up to as much as one quarter of project costs. Indirect estimates suggest that corruption-related losses may amount to 30 percent of generated power in some countries.

Our existing evidence is fragmentary and open to wide margins of error, however. And, as the next section discusses, evidence to date suggests that perceptions measures in particular may not be able to provide any strong degree of accuracy regarding the extent and impact of corruption.

# **Problems of Perception**

Perceptions measures designed to capture the extent of grand corruption appear reasonably stable over time, and they correlate with a number of objective indicators that we might expect them to correlate with (broad measures of development and factors such as the extent of regulation, for example). Perceptions of corruption in a given country are also broadly correlated across different surveys (even when these survey noticeably different groups). Nonetheless, there are reasons to believe that broad aggregate

> 7 http://www.worldbank.org/transport/roads/rd_tools/rocks_main.htm

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