Definition

The demand and supply of prostitution

Introduction

Buying and selling of sex can be analyzed as any regular economic exchange. The demand side is made up of customers who compensate the suppliers, prostitutes, for the commodity, or service, of sex. This all takes place within some regulatory framework.

The market for sex is a contentious one and has often been subject to heavy regulation. Both these facts have spurred academic research, as this chapter will show. However, the field has until recently not been very well developed, mostly because it has been plagued by a scarcity of reliable data. The lack of data is due to both the fact that prostitution in many societies is illegal or just at the margin of being illegal and the social stigma attached to being associated with the trade.

This chapter goes through factors that have found to be important with regard to the demand for and supply of prostitution. A particular focus is on the relationship between laws and quantity of sex bought and sold. It ends with an identification of gaps in the literature and a discussion of some underexplored questions and fruitful avenues for further research.

Demand

Amenable to Change Through Laws

The most common way that laws have been used to affect the demand for prostitution is by outright criminalization. The possibility of a penalty is an unambiguous (expected) cost for a potential buyer and will lead to less prostitution. This mechanism is confirmed empirically by Jakobsson and Kotsadam (2012), who investigate the effect of criminalization of buying sex on the amount of sex bought. Using longitudinal data from Norway and Sweden and employing a difference-in-differences approach, they estimate that the criminalization of buying sex in Norway in 2009 leads to a downward change in the amount of sex bought of 3.5% points. They do not find an effect on attitudes in this sample and conclude that the most likely mechanism is an increased risk of getting caught. A serious problem in this type of studies is that they rely of self-reporting, in particular self-reporting of activities that are not only highly stigmatized but also change legal status during the period investigated. The authors also use different types of measures, one direct whereby people are asked if they had bought sex during the last 6 months and one more indirect where the respondents are asked if they know someone having bought sex during the last 6 months. While it is likely that respondents are more likely to report on people they know, it is still an inherent problem that the people they know perhaps keep such information more to themselves after it has become illegal.

If demand is relatively inelastic, criminalization of clients may to a large extent drive the activity further underground, with a corresponding increase in risk and worsened working conditions for prostitutes.

Laws may also have a normative function. In particular, it may have an expressive function in signaling a society’s beliefs about what is considered acceptable behavior. Jakobsson and Kotsadam (2011) analyze whether the criminalization of buying sex in Norway in 2009 affected attitudes to prostitution. Again using longitudinal data from Norway and Sweden and employing a difference-in-differences approach, they find that the law made people in the capital more negative toward buying sex, but no effect on moral attitudes in the aggregate. They explicitly relate this to a framework whereby people that are most affected by legal changes are most likely to change their attitudes and argue that since people in the capital area were more exposed to street prostitution before the law and saw a large immediate reduction afterward, they should be more likely to be affected. They also find that young people were more affected in their attitudes by the law, which they link to socialization theory arguing that young people are more adept to changing their moral values. On the other side, passing laws that are difficult to enforce or against which there is significant disagreement may weaken the respect for laws in general.

Della Giusta et al. (2009b) model reputation and stigma explicitly. Loss of reputation may be incurred by both buyers and sellers of sex and reduce the amount of sex exchanged. As described in the studies above, moral attitudes may not be very responsive to the law, but criminalization certainly carries social stigma in itself. Although Jakobsson and Kotsadam (2012) do not find an effect on moral attitudes of Norway’s prostitution law, it is possible that the law increased the stigma related to buying sex and thereby added to the formal penalty. Della Giusta (2010) suggests that politicians adopt overly repressive regimes to please conservative swing voters.

Della Giusta et al. (2009a) delve empirically into the demand side and find that stigma does play an important role. They also find that demand may be multifaceted, e.g., in terms of risk preferences, and stress the importance of recognizing this when designing policy.

Important Factors Less Responsive to Legal Change

Insofar as sex is a normal good, the amount bought depends positively on an individual’s income. However, prostitution is more common in poor countries. This will often have to do with supply, discussed below, but higher income of the customers may also decrease prostitution. Edlund and Korn (2002) propose a theoretical model in which increases in male (customer) income decrease the number of prostitutes because men prefer women as wives rather than as prostitutes. Relatedly, men’s marriage opportunities may to a large extent determine their demand for prostitution and itself be determined by income, although married men constitute a large share of the demand. This suggests that policies and regulations promoting stable employment opportunities and a social safety net are relevant tools for authorities concerned with prostitution.

Noncommercial nonmarital sex and commercial nonmarital sex are typically thought of as substitutes for marital sex (Edlund and Korn 2002), but the relation between commercial and noncommercial nonmarital sex is ambiguous. On factors such as pornographic material, a society’s sociosexual culture, and the distinctness of gender roles, there is also little consensus.

Sex ratios in the population are also thought to be important. Places where men have outnumbered women to a significant degree have largely seen more prostitution. As Edlund and Korn (2002) point out, these places have tended to consist of men in transit, who participate only in a locality’s sex market and not in its marriage market.

Supply

In some countries, selling sex is illegal while buying is legal, but a number of countries maintain the illegality of both sides of the market. When selling sex is illegal, the potential prostitute faces formal sanctions in addition to social stigma. The occupation of prostitute is thus made less appealing, and the woman in question is perhaps led to consider other even less desirable options. If prostitution does not entail any negative externalities and criminalizing selling sex is bad for women in the business, lawmakers should of course think twice before enacting such laws. What women do, and even if they do change occupation, after it becomes illegal is, however, unknown, but there are indications of severe externalities in terms of sexual trafficking, so a firm policy conclusion cannot be reached at this stage.

The most obvious factor affecting the supply of prostitution is income relative to other occupations and in general employment opportunities for women. As with any other type of work, the better potential labor market elsewhere, the less supply there will be of workers in a particular trade. As with the demand side, this suggests a role for providing employment opportunities and a social safety net in reducing prostitution. Other factors that impact the profitability of prostitution are sex ratios and inequality. To the best of our knowledge, there are no empirical studies investigating these issues.

Another standard factor in occupational choice is working conditions. As an effect of being undertaken outside the formal economy, prostitution has often lacked regulation and oversight. In general, prostitutes face a more risky working environment than other laborers. In Europe, a significant minority of countries have legalized prostitution and tried to regulate the industry (Jakobsson and Kotsadam 2013). Safe working conditions, access to health services, and the rights to public benefits are all factors that make prostitution relatively more tempting. Regulations denying these to an occupation, as is largely the case for prostitution, can therefore be expected to lead to less selection into that profession. Any form of criminalization will likely lead the mere advocation of basic rights and labor standards more difficult.

Prostitution is distinct from most other professions in that it carries a significantly higher opportunity cost in terms of social stigma. Della Giusta et al. (2009b) model reputation explicitly. Criminalization will mostly affect the stigma attached to the side or activity that is criminalized; however, it might spill over to other sides as well. For instance, outlawing buying of sex could increase the stigma not only of buying sex but also of selling. Edlund and Korn (2002) stress foregone marriage opportunities as the most important opportunity cost of prostitution. This is due to limited mobility between the marriage and prostitution sectors, a feature that also explains prostitutes’ relatively high (up-front) wages. However, Arunachalam and Shah (2008) find no empirical support for the marriage-based explanation of the earnings premium in sex work.

There have been many instances in which women have been coerced to work as prostitutes. Forced labor is now outlawed in almost all countries – prostitution legislation aimed at alleviating this problem has therefore often been aimed at restricting the market, in the hope that this will hurt the potential profits of traffickers. Related to this, there has recently been developed a separate literature on trafficking. Although any kind of criminalization will reduce prostitution, the effect on trafficking is ambiguous, since criminalization may also lead to a substitution effect toward more trafficked prostitutes (Cho et al. 2013). Jakobsson and Kotsadam (2013) and Cho et al. (2013) investigate this question using cross-country data and case studies and find that harsher sex laws are associated with less trafficking.

Notwithstanding the problem of forced labor in the sex trade, a significant part of international sex labor migration can be seen as voluntary and economic in motivation. Thus, policies that promote freer movement of labor and fewer restrictions on travel can be expected to increase the amount of prostitution. On the other hand, better opportunities to freely travel and search for other jobs may reduce the possibilities of human traffickers to exploit or deceive vulnerable migrant and force them into the sex trade.

A general issue with regard to trafficking is the tension between the welfare of potential trafficking victims and that of current prostitutes. Restricting the market for prostitution, either through the denial of benefits to prostitutes or some form of criminalization, is likely to lead to prostitution being less profitable and thus less tempting for traffickers but is also likely to hurt those currently in the profession. Lee and Persson (2013) propose a regulatory framework that provides a solution to this conundrum: licensing prostitutes and criminalizing buying sex from unlicensed prostitutes. This model deters demand for nonvoluntary prostitutes and thus reduces the potential profit for traffickers while at the same time safeguarding the interests of licensed prostitutes.

Technological change has impacted the prostitution market. Cunningham and Kendall (2011) examine the use of the Internet in the prostitution business. They find that online soliciting has displaced some of the off-line market but that the net effect is an increase in supply. They also find that prostitutes soliciting online are largely engaging in lower-risk behaviors than their street-level counterparts, although former street workers may retain their higher-risk behavior also online.

Gaps in the Literature

Scarcity of reliable data is one of the main challenges for the study of prostitution. Collection of new, reliable data is one of the most worthwhile initiatives with regard to prostitution research. This could be in the form of surveys, anonymous if necessary, but in societies where prostitution is legal, the ambitions should be even higher. For instance, if the framework of mandatory registration of legal prostitutes proposed by Lee and Persson (2013) is adopted, data from those registration procedures should be collected, kept safe, and be available for researchers. In general, regulation will help data collection, due to the fact that one is not collecting data on something criminal and that there will be data emanating from the enforcement of regulations, whether they are about working conditions, health, or taxes.

Even where prostitution is not legal, there are opportunities to collect more and better data and develop better measures, for instance, through the use of list experiments (also called list treatment or the item count technique).

There has been little research on how different forms of criminalization or regulation affect the working conditions of prostitutes. Di Tommaso et al. (2009) use data from the Anti-Trafficking Unit of the International Organization for Migration and find that the well-being of trafficked women is (further) worsened when having to work in secluded spaces.

Criminalization legislation is often the result of an alliance between one side consisting of people who are opposed to prostitution as a matter of principle and another that is concerned about coercion of involuntary prostitutes. The stability of this alliance remains an open question.

Whether demand for voluntary and nonvoluntary prostitutes is uniform is an important question that has not been much studied. For instance, if a substantial share of demand is for the voluntary product, that would be valuable to take into account when designing regulation, as shown theoretically by Lee and Persson (2013). Della Giusta et al. (2009a) take some steps toward disaggregating the demand side, but they do not specifically focus on if demanders care about voluntariness.

There are also ways in which the supply side can be disaggregated further. Globalization has made movement across borders easier. Cho et al. (2013) and Jakobsson and Kotsadam (2013) investigate the relation between sex laws and trafficking, but it would be valuable to know also about the more direct relation between the enforcement of laws against trafficking and coerced labor on the one side and involuntary trafficking on the other.

Topics on which some hold strong moral attitudes can easily become politicized and subject to limited inquiry. So also with prostitution; it is therefore particularly important that researchers in this field are allowed to remain independent when addressing the topics described in this chapter.

Cross-References