Incentives for Promoting Safety in the Chinese Construction Industry

Abstract

Construction accidents occur frequently in China because the supervision of safety standards mandated by the government has not had its intended effect. In this paper, the authors propose a model to incentivize the management of safety during construction that involves the government as well as the owners and contractors in the industry. This study analyzes the principal–agent relationship involving each participant to determine their utility function and the minimum constraints on their participation, and uses this to obtain the optimal parameters to incentivize the management of safety during construction by solving for the ones related to the contractor’s effort and reward for their performance in the proposed model of incentives. Through the design of contractor incentive parameters and owner incentive parameters to further influence the government contractor and owner tripartite safety incentive model to make the model more perfect and in line with the development status of China. This study tested the proposed model using simulations. The results indicated that increasing the cost coefficient and level of the contractor’s effort increases their expected safety-related benefits, and increasing the coefficients of reward and punishment by the government reduces the contractor’s expected safety-related benefits. Moreover, the government can motivate the management of safety during construction by offering appropriate rewards and punishments. In particular, if the government increases incentives for safety, the safety-related benefits for owners and contractors decrease in the short term but increase significantly in the long term.

Keywords

• safety management
• incentive mechanism
• construction
• principal–agent relationship