Sex Workers and the Cost of Safe Sex: The Compensating Differential for Condom Use in Calcutta

The practice of safe sex by commercial sex workers is considered to be central in preventing the transmission of AIDS in developing countries. However, anecdotal evidence suggests that sex workers may face large losses in income from using condoms because of a strong preference for condom-free sex among clients. This paper attempts to estimate the compensating differential for condom use among sex workers in Calcutta from a survey conducted in 1993. We follow an instrumental variable approach that relies on the non-systematic placement of sex workers in an intervention program that focussed on providing information on HIV-AIDS and safe sex practices. This allows us to identify the relationship between condom use and the price per sex act by reducing the bias from unobserved heterogeneity which is widespread in estimates of compensating wage differentials. FIML estimates reveal that sex workers who always use condoms face a loss of 44 per cent in their average earnings per act suggesting that there may be strong disincentives that prevent sex workers from practicing safe sex. This could be a major obstacle in preventing the spread of AIDS in parts of the world, like India, where knowledge about safe-sex practices is poor.