Prostitution, which is illegal nationwide except for a few counties in Nevada, continues to create problems for communities and law-enforcement agencies. A new study by an economics researcher at the University of Arkansas analyzes the U.S. prostitution market and provides policy recommendations to increase safety for women and communities and help government agencies regulate or enforce “the oldest profession.”
Contrary to assumptions that women enter the prostitution market only because they are desperate – that they need money to pay bills or buy drugs – the study indicates that many women, especially educated, affluent women, are making a rational decision to enter certain segments of the prostitution market. However, the research confirmed that women do not explicitly choose to enter the streetwalking segment of the prostitution market.
“Our model demonstrated that the prostitution market may be pulling educated women – these so-called ‘high-opportunity-cost’ women – out of the conventional labor market and the marriage market, in many cases,” said Jennifer Hafer, a doctoral student in the Graduate School of Business at the University of Arkansas. “The findings suggest that these women are not forced into the prostitution market but rather choose to enter it for many of the same reasons that people enter the conventional job market – money, stability, autonomy and even job satisfaction.”
Under the direction of economics professor Amy Farmer, Hafer developed a decision model to analyze women’s entry into the prostitution market. She examined high- and low-quality markets within the various types of legal and illegal prostitution, which includes high-end escorts, call girls, brothel prostitutes, streetwalkers and women who advertise prostitution on the Internet. The model allowed her to examine the type of market a woman would enter and how variables such as morals, effort, health risks, stigma, earnings and the probability of getting caught in an illegal activity influence a woman’s decision.
For this study, the only type of legal prostitution, both high- and low-quality, was that which occurs in brothels, which are legal in only a few rural counties in Nevada. High-end escorts and women who use the Internet to find clients represented high-quality illegal prostitution. The low-quality illegal market referred to streetwalkers, women who walk the streets in search of customers.
As an economist, Hafer framed the study in terms of high- and low-opportunity cost. In a purely economic context, opportunity cost refers to what is lost by choosing one out of two or more alternatives. It refers to the benefits one could have received by taking an alternative action. For this study, factors that influenced opportunity cost for a woman were education, training, access to both physical and social resources, access to the marriage market and family background variables such as type of household, the neighborhood one grew up in and education level of parents. So, women with high-opportunity cost had greater access to or benefitted from these variables.
The model revealed that high-opportunity-cost women – affluent and educated women with strong family backgrounds and access to resources – may be choosing to enter the high-quality illegal prostitution market, via a high-end escort service or through the Internet. These women would not enter the legal prostitution market, according to the model. Women with low-opportunity costs – that is, women with less education and economic opportunities – choose to enter the low-quality legal market – the brothels in the Nevada counties. Again, based on most conditions of the model, women do not choose to participate in streetwalking prostitution.
Considering the finding that low-opportunity-cost women chose the legal market, Hafer pondered reasons for the existence of the illegal market for these women. There are significant entry barriers to legal brothel prostitution, such as licensing, which might include background and health checks, house rules that the women must follow, such as prohibition of drugs, and, perhaps most significantly, the fact that brothels are located only in Nevada, many miles away from a woman’s support network.
Hafer discussed the findings’ potential impact on policy. Due to negative externalities, streetwalking should remain illegal with continued enforcement, she said. Based purely on the outcomes of the model, brothel prostitution should be legalized and regulated in expanded locations. Her policy attention to escort and Internet prostitution focused on regulation, such as licensing, health testing and possibly taxation, as a means to ensure safety and security for both the prostitute and the consumer. For the escort and Internet markets to be regulated, they must be legalized.
“The major question concerning policy is what is the overall goal?” Hafer said. “Is it better for society to make prostitution illegal in all circumstances? Legalize prostitution subject to regulation? If the demand for prostitution is present, there will always be supply.”
Farmer holds the Margaret Gerig & R.S. Martin Jr. Chair in Business in the department of economics in the Walton College of Business.