by Steven D. Levitt and Sudhir Alladi Venkatesh. Reading for Tuesday, 22 January 2008.

Combining transaction-level data on street prostitutes with ethnographic observation and official police force data, we analyze the economics of prostitution in Chicago.  Prostitution, because it is a market, is much more geographically concentrated than other criminal activity. Street prostitutes earn roughly $25-$30 per hour, roughly four times their hourly wage in other activities, but this higher wage represents relatively meager compensation for the significant risk they bear. Prostitution activities are organized very differently across neighborhoods. Where pimps are active, prostitutes appear to do better, with pimps both providing protection and paying efficiency wages. Condoms are used only one-fourth of the time and the price premium for unprotected sex is small. The supply of prostitutes is relatively elastic, as evidenced by the supply response to a 4th of July demand shock. Although technically illegal, punishments are minimal for prostitutes and johns. A prostitute is more likely to have sex with a police officer than to get officially arrested by one. We estimate that there are 4,400 street prostitutes active in Chicago in an average week.

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Published: Friday, January 18, 2008