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.

HT: The Crime Economist

For an interesting in depth discussion of the prostitution issue check out this book.

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