Human Trafficking and Regulating Prostitution

44 Pages Posted: 14 May 2012 Last revised: 5 Mar 2019

See all articles by Samuel Lee

Samuel Lee

Santa Clara University - Leavey School of Business; European Corporate Governance Institute (ECGI); Swedish House of Finance

Petra Persson

Stanford University; Research Institute of Industrial Economics (IFN)

Date Written: November 1, 2018


Certain markets are illicit because the supply is partly coerced, but little is known about the
optimal regulation of such markets. We model a prostitution market with voluntary and coerced
prostitutes and ask what regulation can restore the benchmark outcome that would arise under
laissez-faire absent coercion. Whereas current policies – decriminalization, criminalization of the
buy or sell sides, and licensing – are ineffective against trafficking or harm voluntary suppliers,
we show that an alternative policy can restore the benchmark outcome. Our results are relevant
to the ongoing debate about decriminalizing prostitution and provide guidance for empirical
work on prostitution regulation.

Keywords: Prostitution, trafficking, contemporary slavery, illegal goods, organ market

JEL Classification: D10, J16, J47, J49, K14, K23

Suggested Citation

Lee, Samuel and Persson, Petra, Human Trafficking and Regulating Prostitution (November 1, 2018). IFN Working Paper No. 996; NYU Stern School of Business EC-12-07; NYU Law and Economics Research Paper No. 12-08. Available at SSRN: or

Samuel Lee (Contact Author)

Santa Clara University - Leavey School of Business

500 El Camino Real
Santa Clara, CA California 95053
United States

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels

Swedish House of Finance ( email )

Drottninggatan 98
111 60 Stockholm

Petra Persson

Stanford University ( email )

Stanford, CA 94305
United States

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15

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