Corruption in Construction Projects and Deterrence Policies in Developing Countries

Chapter 12

Corruption in Construction Projects and Deterrence

Policies in Developing Countries

Lei Shi, Dalian University of Technology

Taisuke Miyao, Asian Development Bank

Kiyoshi Kobayashi, Kyoto University

Introduction

Construction contracts for public works can be interpreted to mean that governments entrust

construction work to the private sector. The relationship between the government and the

private sector can be viewed as a principal–agent relationship, in which the adverse selection

problem due to asymmetric information becomes the main focus. According to traditional

agency theory, the adverse selection problem occurs if the principals cannot know exactly what

type of agents they are dealing with before entering into a contract. Similarly, the adverse