Tuesday, December 29, 2009

Wages in high-end prostitution

I reported earlier on the literature trying to understand why prostitutes are so well paid. I concluded that this was because of the risk, but this could not explain the full wage premium. The rest must have to do, for example, with foregone marriage opportunities due to the stigma of prostitution.

Lena Edlund, Joseph Engelberg and Christopher Parsons look at a prostitution market where there is no risk, the high-end escort service industry. These workers do not work on the street and thus have a better control on who they do business with. Also, they are less visible, which should help a little with the stigma.

One is to expect that the price of an escort decreases with age. But it appears to do so very little. In fact, there is a clear hump at the very ages where the probability of marriage is the highest in the general population. Thus, foregone marriage opportunities are clearly important. Furthermore, Edlund, Engelberg and Parsons find that those escorts whose activity has no impact on the marriage market (does not offer sex, transsexual) do not have such a hump. Finally, in places where most of the business is with travelers, the premium is lower.

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