Enforcing Licensing Requirements: Implications for Disease Transmission in the Sex Market

Several countries are pursuing the regulation of commercial sex work in order to decrease the spread of sexually transmitted infections (STIs) and reduce the probability of a generalized HIV/AIDS epidemic. In poor countries in particular, the commercial sex market is characterized by two sectors, brothel and street, where the latter is marked by riskier behavior (e.g., lower rates of condom use) and higher prevalence of STIs. This paper studies the public health effects of enforcing licensing requirements in a two-sector commercial sex market, where enforcement varies between sectors. Specifically, we use nationally representative data from eight cities in Ecuador to examine the effects on condom use and STI prevalence of enforcement in brothels vs. enforcement in the street. We exploit regional variation in the frequency of police visits to verify sex worker compliance with licensing requirements. The findings indicate that increasing enforcement in the street sector significantly increases condom use and decreases sexually transmitted infections, yet increasing enforcement in brothels has no such effect. This paper proposes a theoretical model that explains this divergence as a consequence of sex workers’ sectoral choice. Increasing enforcement on the street unambiguously improves public health outcomes by encouraging sex workers to enter the more regulated brothel sector, where STI prevalence is lower. Increasing enforcement in the brothel sector induces counteracting effects, as some sex workers choose to comply with the licensing requirements (and undertake less risky behavior as a result), but others move to the street sector and are exposed to greater risk of infection. To minimize perverse incentive effects of regulation, enforcement should take into account the underlying characteristics of the commercial sex market, and should be concentrated in the sector which is marked by lower condom use and higher STI prevalence. ∗This paper has benefited from useful comments from Raj Arunachalam, Paul Gertler, Seema Jayachandran, Ethan Ligon, Ted Miguel, Nancy Padian, Elisabeth Sadoulet, and participants of the Berkeley development lunch and workshop. I am also indebted to Juan Pablo Gutierrez and Diana Molina for assistance in the design and implementation of the survey. Finally, I gratefully acknowledge financial assistance from the UCMEXUS Foundation, IBER and the Center for Health Research at UC Berkeley. As always, the usual disclaimers apply. †Department of Agricultural and Resource Economics, University of California, Berkeley CA 94720; [email protected]