Tuesday, October 7, 2008

Why is prostitution so well paid?

The oldest trade usually pays well, even where it is legal. Why so? Prostitution is low-skilled, labor intensive and female, all attributes that are usually associated with low pay. Lena Edlund and Evelyn Korn have proposed that the high pay can be justified by that fact that prostitute give up their fertility. This is based on the taboos that prevent the marriage of prostitutes. But this is theory.

Raj Arunachalam and Manisha Shah provide an empirical test of this theory. They use sex worker data from Ecuador and Mexico. Prostitutes are indeed better paid, especially when young, when they are also more likely to be married. Even worse for the theory, the premium is higher for male sex workers.

The authors hypothesize that the true explanation for the higher pay is risk. Sex workers face much higher risks of catching sexually transmitted diseases. Some proof of this is that sex workers earn less when using a condom, as shown by Paul Gertler, Manisha Shah and Stefano Bertozzi. But in the Ecuador sample studied here, this can only explain a quarter of the 30% premium.

5 comments:

Anonymous said...

I love how the google ads managed to find an ad about a "stimulus package" appropriate for this post

T-Bone said...

How about the negative stigma of the job? That's gotta lower the potential workforce.

As well as the need to be at least somewhat good looking (which may correlate strongly to pay)?

And I recall reading that good looks actually result in higher pay and/or better jobs. So attractive people maybe be more likely to get better jobs, lowering the pool of potential prostitutes.

Vilfredo said...

Not that I have much experience on the topic, but from looking at mug shots of prostitutes in the paper, I would not argue that they are better looking than average. So I do not think the beauty premium applies. The stigma is an relevant issue, tough, and I am surprised the authors did not consider that as well.

Anonymous said...

Hello,
Netherlands and Sweden are 2 interesting test cases. Netherlands legalized brothels some years ago, while Sweden penalizes people who patronise prostitutes, and treating people who sell their bodies as victims.
Should we legalize prostitution? I don't know. I am curious to read what economists have to say on this subject.
Is it really working for the Netherlands? Sweden?

Cops, who patrol Amsterdam’s red-light district, say that more than half the ladies posing in windows are there against their will.
The idea of legalizing it in the first place was to stop all the bad things that are associated with the sex trade. So it is not really working for the Netherlands.
And Sweden? Sweden has not found a way of shielding prostitutes from exploitation and violence either.

Your thoughts, please.

Anonymous said...

"So it is not really working for the Netherlands."

This all sounds heavily anecdotal. You are going to need to do a far better job of convincing a group of economists and economically-interested non-economists who read this blog and the scientific studies it posts, if your theory is that "prostitution is bad."

What makes the police experts at determining what % are held against their will, anyway? Police are known to exploit prostitutes more than any other group of people.

I am sorry to say, but your story reeks of informality and absent of evidence.