Wednesday, 30 December 2009

The wages of sin ...

are high.

A new paper by Lena Edlund, Joseph Engelberg and Christopher A. Parsons, The Wages of Sin, looks at the high-end prostitution market, the so called escort market.

A standard argument for the high wages of prostitutes is that they compensate for risk and things like foregone marriage opportunities due to the stigma of prostitution. This new paper looks at the prostitution market where there is a lower risk, the high-end escort service industry. These workers do not work on the street and thus have a better control on who they do business with. Also, they are less visible, which should help a little with stigma issues.

It may be expected that the price paid for an escort would decrease with age. But it appears to do so very little. In fact, wages have a hump-shaped pattern, with a peak at the age bracket where the probability of marriage is the highest in the general population. This suggests that foregone marriage opportunities are important. Furthermore, Edlund, Engelberg and Parsons find that those escorts whose activity has no impact on the marriage market, those who, for example, do not offer sex or are transsexual, do not have such a hump. Finally, in places where most of the business is with travellers, the premium is lower.

The abstract reads,
Edlund and Korn [2002] (EK) proposed that prostitutes are well paid and that the wage premium reflects foregone marriage market opportunities. However, studies of street prostitution in the U.S. have revealed only modest wages and considerable risks of disease and violence, casting doubt on EK’s premise of an unexplained wage premium. In this paper, we present evidence from high-end prostitution, the so called escort market, a market that is, if not entirely safe, notably safer than street prostitution. Analyzing wage information on more than 40,000 escorts in the U.S. and Canada collected from a web site, we find strong support for EK. First, escorts in the sample earn high wages, on average $280/hour. Second, while looks decline monotonically with age, wages follow a hump-shaped pattern, with a peak in the 26-30 age bracket, which coincides with the most intensive marriage ages for women in the U.S. Third, the age-wage profile is significantly flatter, and prices are lower (5%), despite slightly better escort characteristics, in cities that rank high in terms of conferences, suggesting that servicing men in transit is associated with less stigma. Fourth, this hump in the age-wage profile is absent among escorts for whom the marriage market penalty is lower or absent: escorts who do not provide sex and transsexuals.

No comments: