Alex Zhou, University of Warwick

"Outside Options and the Supply of Sex Work"

Abstract

Evidence shows that criminalizing participation in the market for sex often reduces welfare for sex workers. We use a field experiment in Cambodia to demonstrate that this trade-off between decreasing market size and worker welfare can be avoided. We randomize two interventions aimed at improving labor market conditions for sex workers. We find that incentivizing the outside work option increased outside option earnings by 20% and decreased sex work by 13%, resulting in a 13% increase in overall earnings. These price effects do not appear to be driven by income effects, as a separate unconditional cash transfer intervention did not decrease sex work. We use our results to estimate a cross-price labor supply elasticity of −0.57 between sex and non-sex work and an own-price labor supply elasticity of 0.45 for non-sex work. To generalize these findings to other outside options, we develop a model of labor choice; our calibration implies that, on the margin, the additional disutility from sex work is 16 times that of non-sex work. Overall, our paper shows that because labor supply for sex work is elastic, policies that leverage workers’ responsiveness to prices can decrease the size of the market for sex without compromising worker welfare.

Contact person: Neda Trifkovic