Regulating Prostitution: Theory and Evidence from Italy
AbstractWe build an equilibrium model of prostitution where clients and sex workers choose to demand and supply sex under three legal regimes: prohibition, regulation and laissez-faire. The key feature is the endogenous evolution of the risk as a consequence of policy changes. We calibrate the model to empirical evidence from Italy and then compare the effect of different policies on the equilibrium quantity of prostitution and on the harm associated with it. A prohibition regime that makes it illegal to buy sex but not to sell it is more effective than the opposite regime in reducing quantity but less effective in reducing harm. Taxes are one inducement to go illegal and prevent some of the less risky individuals from joining the market, leaving it smaller but riskier. A licensing system that prevents some infected individuals from joining the legal market reduces the risk and is therefore associated with a sharp increase in quantity. While prohibition is preferable to minimize quantity, regulation is best to minimize harm.
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Bibliographic InfoPaper provided by Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy in its series CSEF Working Papers with number 308.
Date of creation: 20 Feb 2012
Date of revision: 27 Nov 2012
Prostitution; Regulation; Prohibition; Lasseiz-faire.;
Find related papers by JEL classification:
- L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
- I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
- O17 - Economic Development, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-02-27 (All new papers)
- NEP-IUE-2012-02-27 (Informal & Underground Economics)
- NEP-REG-2012-02-27 (Regulation)
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