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This dissertation, The Transaction Costs and the Choice of Contractual Arrangements in the Construction Industry in Hong Kong by Kiu-wai, Chan, 陳喬威, was obtained from The University of Hong Kong (Pokfulam, Hong Kong) and is being sold pursuant to Creative Commons: Attribution 3.0 Hong Kong License. The content of this dissertation has not been altered in any way. We have altered the formatting in order to facilitate the ease of printing and reading of the dissertation. All rights not granted by the above license are retained by the author. Abstract: This thesis follows a neo-institutional economics approach to analyse the economic nature of contractual arrangements in the Hong Kong construction industry. It explains that subcontracting can reduce transaction costs: (1) using piece-rate contracts to replace time-wage contracts to save the high costs of monitoring; and (2) using subcontractors as intermediaries to perform tasks at a lower transaction cost due to their comparative advantages in gathering price information, specific knowledge and resources. The above assertions are evaluated in terms of three refutable hypotheses using statistics published by the Census and Statistics Department of the Hong Kong SAR Government. Hypothesis I: To be employed with short term contracts is not preferred by the construction workers than to be employed with long term contracts; Hypothesis II: A subcontractor is not more commonly used in construction works of higher values than in those of lower values; Hypothesis III: A subcontractor is not more commonly used in construction works by ordinary trades than in those by special trades. In Table 1 summarizes the test results for each hypothesis and states their wider theoretical implications. The three hypotheses are all refuted. The message is that subcontracting is neither an inefficient contractual arrangement nor a means of exploitation by the upstream contractors. It is rather the result of the free choice of the contracting parties, as a matter of constrained maximization in a private property rights system, seeking to reduce transaction costs. Table 1. Summary of Tests Results for Hypotheses I, II and III Hypotheses Regarding Subcontracting in the Hong Kong Construction IndustryTest ResultsTheoretical ImplicationsHypothesis ITo be employed with short term contracts is not preferred by the construction workers than to be employed with long term contracts.Hypothesis refuted.The construction workers prefer being employed with piece-rate contracts or casual daily wage contracts.Hypothesis IIA subcontractor is not more commonly used in construction works of higher values than in those of lower values.Hypothesis refuted.A subcontractor is more commonly used in construction works of higher values and by ordinary trades. Subcontracting is not a matter of random choice but for reducing transaction costs. Subcontracting decision would depend on the characteristics of the construction works.Hypothesis IIIA subcontractor is not more commonly used in construction works by ordinary trades than in those by special trades.Hypothesis refuted. A subcontractor is more commonly used in construction works of higher values and by ordinary trades. Subcontracting is not a matter of random choice but for reducing transaction costs. Subcontracting decision would depend on the characteristics of the construction works. DOI: 10.5353/th_b4728004 Subjects: Construction contracts - China - Hong Kong - Economic aspectsTransaction costs

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