Sex Work in Developing Countries

Why Might Women Enter The Sex Market?

Understanding why women enter the sex market is crucial, especially if effective policies related to the sex market are to be implemented. There is obviously no one single reason that women and girls become prostitutes. Some have hypothesized that women enter because sex work pays well (Edlund and Korn, 2002), or because they face economic shocks in a world of poverty (Robinson and Yeh, 2012), or due to lack of outside options in the labor market, and of course there are those who enter due to force, kidnaping, and/or trafficking. Issues related to trafficking have not been discussed too much in the economics literature. This is likely due to the illegal, hidden nature of this market, which makes it difficult to collect good microdata, as well as the fact that many models in economics tend to implicitly assume some semblance of free choice. Without the intention of understating the importance of trafficking and dangers faced by many girls and women who enter the sex market via this channel, this article will not cover this area.

Edlund and Korn (2002) introduce a puzzling stylized fact that prostitution is ‘‘low-skilled, labor intensive, female, and well-paid.’’ There is no other occupation like it that is female dominated and pays so well (although it is low skilled), and the authors offer a provocative explanation for this puzzle: sex workers draw a compensating differential due to the foregone opportunity to sell their fertility in the marriage market. Edlund and Korn (2002) not only provide the first formal model of occupational choice involving prostitution but also draw an intriguing link between the labor market and the marriage market that holds for only one occupation. When a woman chooses to become a sex worker, she relinquishes the compensation she would otherwise receive in marriage, because taboos prevent prostitutes from marrying. Thus, even in settings where prostitution is legal, it must draw an earnings premium. Beyond drawing considerable media attention, the richness of the Edlund–Korn model has made it the starting point for economists’ discussions of sex work (e.g., Giusta et al., 2004). An especially attractive feature of the paper is that it generates a number of testable predictions.

Arunachalam and Shah (2008) test the Edlund–Korn model. They utilize two large-sample datasets on sex workers, collected in Ecuador and Mexico, which they match to national labor survey data in the respective countries. They corroborate the existence of a sizable earnings premium for sex work, but fail to find support for the marriage-based explanation for this premium. Sex workers are actually more likely to be married than nonsex workers at younger ages when the earnings premium for sex work is highest. Furthermore, they find that the premium to male sex work is even larger than that for women. They hypothesize that the earnings premium would be better explained as a compensating differential, akin to that observed in other risky professions.

Although Robinson and Yeh (2012) agree that that sex work pays much better than other available jobs especially in poor countries and that this level difference in average income is clearly important, another key consideration is the variability of consumption. In Africa, as in much of the developing world, shocks are quite common and formal safety nets are often missing. In addition, insurance through informal systems of gifts and loans is rarely, if ever, complete (Townsend, 1994). Robinson and Yeh (2012) show that women enter the transactional sex market in western Kenya because clients send transfers in response to negative income shocks. These women develop relationships with regular clients who then become the primary source of interperson insurance that women receive. For example, transfers from regulars increase by 67–71% on the days around one’s own illness and by 125% on the days around the death of a friend or relative.

Pollution and Health
Economics of Smoking