Thinking about prostitution
You won’t find a chapter on prostitution in most economics textbooks. But if economists Lena Edlund and Evelyn Korn have their way, that may change.
Prostitution as an industry is full of economic puzzles: Prostitutes are low-skilled, but highly paid. Both women and men supply prostitution, but demand is almost uniformly men. Prostitutes are well-paid, but occupy a low rung on the social ladder. And so on.
In a recent paper in the Journal of Political Economy, economists Lena Edlund and Evelyn Korn build a model of prostitution that demystifies much of the economics of the world’s oldest profession. [Download paper here (PDF)]
The authors nail some interesting questions. One is, Why is prostitution more common in poor countries? One obvious explanation is that prostitution falls as women’s income and opportunity costs rise. What’s less obvious is that prostitution falls as men’s income rises, too.
Why does that happen? Because to some extent—here come the nasty emails—wives and prostitutes are substitutes, with prostitutes being what economists call an inferior good. As income rises men prefer stable marriages over occasional hookers. And this has policy implications: the best way to reduce prostitution may be making both women and men richer, rather than legal penalties and informational campaigns.
Another question is, Why is prostitution more common in areas with high migration? The authors’ note that one cost of being a prostitute is reduced value in the marriage market. Most guys won’t marry ex-hookers. Prostitutes can avoid this cost by hiding the fact that they’re prostitutes. Frequent migration helps do that, by avoiding a social reputation. And that’s exactly what we see.
More interestingly it explains why, ceteris paribus, foreign prostitutes are cheaper in places where both exist—they’re the low-cost producers of prostitution.
Of course, the big question the authors don’t address is whether prostitution’s spillover effects—spread of disease, impact on the stability of marriage and the likelihood of out-of-wedlock children, etc.—justify the widespread bans we see today.
Food for thought on your next trip to Vegas.
Posted by Andrew on Thursday May 27, 2004 | Feedback?
