Sex for money is about more than the sex or the money

With Canada looking to decriminalize prostitution, and Sweden touting the success of its increased penalties for pimping and trafficking (the link’s a bit old now), it only makes sense, as economists, to ask why people would engage in transactional sex at all.

Psychologists and anthropologists, I’m sure, have plenty of their own answers. Economists, surely, could come up with a theory of prostitution (if they haven’t, I should get on that). Without too much effort, most people could name the most likely characteristics of women in the sex trade–low self-esteem, from families with a history of abuse, low educational attainment, etc. But there is also reason to ask why women would stay in the sex trade, which is actually a very different question than why do women enter the sex trade. At least one recent paper has explored the relationships between purveyors and consumers of transactional sex. They found, interestingly, that complex relationships form between the two parties, even to the point of providing extra income in times when sex workers couldn’t work or were experiencing a negative “shock”–i.e. illness, death of a family member or an STD outbreak.

The authors of the paper, which comes out of Busia, Kenya, a community rife with development economists testing their theories, found that transfers, or gifts of money, from regular customers increase by 67-71% on days around when a sex worker reported illness and 124% on days around death of friend or relative. In some sense, these regular customers are providing a form of insurance against negative shocks, or events that prevent them from working. The customers are still not providing full insurance for these shocks, meaning though they’re essentially gifting money to their favorite sex worker in order to make the burden of not working or of the extra expense less burdensome, they’re not making up a whole day’s pay, or covering the entire cost of a funeral.

But the question of whether sex workers are fully insured by their relationships with regular customers is less important than whether they are covering themselves better than they would be covered in other professions. Full insurance in poor communities and developing countries is unlikely to come by anyway, so it makes more sense to compare different insurance mechanisms. Here, economics actually does a pretty good job. We are good at comparing two situations in which only one small part of the equation is different (or rather, when we can assume that only one important part is different–if the other different bits are unimportant to the story, we don’t care that they are different, we assume that they do not affect our outcomes). So long as the average amount of the gift is more than the average amount of the transfer she would get had she not been in the sex trade, there is an incentive to enter or remain in the sex trade (the authors here don’t distinguish much between entering and remaining, though I think that’s an important topic for another day). The authors also show this difference to be quite large. Even if a transfer covers only 19% of the cost of a funeral–the average amount reported by the sex workers–that’s far more than zero. On the margin, at least, the incentive seems significant enough to induce women to enter the sex trade as the only arrangement with full insurance, or perhaps just more insurance, is likely marriage.

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