Macroeconomic Forces within the Market for Prostitution

By Cody Cook, Scott Loring, Teddy Niemiec, and Kayla Reinherz. University of Chicago.

This paper explores the impact of macroeconomic forces on the market
for prostitution. Specifically, we use cross-sectional unemployment rate, labor force participation rate, average household income, and the S&P 500 as macroeconom-
ic indicators to investigate the effects of the 2008-2010 recession on the market for prostitution in Chicago. We use the number of prostitution-related arrests from 2005 to 2011 in Chicago as a proxy for the equilibrium quantity of prostitution. Indeed, we are able to show that a 1% absolute increase in the unemployment rate in Chicago corresponds to a decrease of 184 arrests in a given year, roughly a 4.5% decrease in the average total number of arrests. We also demonstrate that there is reason to believe that, during the recession, the consumer demand effect dominates the labor supply effect within the Chicago market for prostitution.

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