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Regulating Prostitution: Theory and Evidence from Italy

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Abstract

We 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.

Suggested Citation

  • Giovanni Immordino & Francesco Flaviano Russo, 2012. "Regulating Prostitution: Theory and Evidence from Italy," CSEF Working Papers 308, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy, revised 12 Nov 2014.
  • Handle: RePEc:sef:csefwp:308 Note: A previous version of the paper has been circulated under the title ”Regulating Prostitution: Theory and Evidence from Italy”.
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    References listed on IDEAS

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    1. Orazio P. Attanasio & James Banks & Sarah Tanner, 2002. "Asset Holding and Consumption Volatility," Journal of Political Economy, University of Chicago Press, vol. 110(4), pages 771-792, August.
    2. Emily Oster, 2005. "Sexually Transmitted Infections, Sexual Behavior, and the HIV/AIDS Epidemic," The Quarterly Journal of Economics, Oxford University Press, vol. 120(2), pages 467-515.
    3. Samuel Cameron & Alan Collins, 2003. "Estimates of a Model of Male Participation in the Market for Female Heterosexual Prostitution Services," European Journal of Law and Economics, Springer, vol. 16(3), pages 271-288, November.
    4. Marina Della Giusta & Maria Laura Di Tommaso & Isilda Shima & Steinar Strøm, 2009. "What money buys: clients of street sex workers in the US," Applied Economics, Taylor & Francis Journals, vol. 41(18), pages 2261-2277.
    5. Michael Kremer, 1996. "Integrating Behavioral Choice into Epidemiological Models of AIDS," The Quarterly Journal of Economics, Oxford University Press, vol. 111(2), pages 549-573.
    6. Jeremy Greenwood & Philipp Kircher & Cezar Santos & Michèle Tertilt, 2013. "An Equilibrium Model of the African HIV/AIDS Epidemic," NBER Working Papers 18953, National Bureau of Economic Research, Inc.
    7. Rao, Vijayendra & Gupta, Indrani & Lokshin, Michael & Jana, Smarajit, 2003. "Sex workers and the cost of safe sex: the compensating differential for condom use among Calcutta prostitutes," Journal of Development Economics, Elsevier, vol. 71(2), pages 585-603, August.
    8. Samuel Cameron & Alan Collins & Neill Thew, 1999. "Prostitution services: an exploratory empirical analysis," Applied Economics, Taylor & Francis Journals, vol. 31(12), pages 1523-1529.
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    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. How to regulate prostitution
      by Economic Logician in Economic Logic on 2012-03-02 21:57:00

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    Cited by:

    1. Immordino, G. & Russo, F.F., 2015. "Regulating prostitution: A health risk approach," Journal of Public Economics, Elsevier, vol. 121(C), pages 14-31.

    More about this item

    Keywords

    Prostitution; Regulation; Prohibition; Lasseiz-faire.;

    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, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation

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