Because legalization makes it easier to enter the sex market (both the workers and the institutions, i.e., brothels) by reducing the associated costs - sex workers are less to face legal harassment or arrests and the institution owners can invest in their business without fear of being shut down - we would then expect the size of the market to increase. Theoretically, this would correspond to an increase in the supply (a rightward shift in the supply curve), which would decrease the price of sex work. Furthermore, we would predict a change in the composition of the market as stigma decreases and more women enter the indoor market and (if indoor and outdoor transactions are close substitutes), then the overall size increase should increase and this should be accompanied by a change in the composition of the market. 

The Theoretical Effects of Decriminalizing Prostitution on the Size of the Indoor Sex Market

The effects of decriminalization on STIs is ambiguous. Decriminalization will likely increase the size of the market for sex work, which could increase the spread of STIs (more sex work –> more STIs being spread). However, with sex work being legal, "lower risk" women may enter the market. That is, women who are more sexually responsible and less likely to be carriers or transmitters of STIs may enter the market. This leaves the net effects ambiguous. 

The Theoretical Effects of Decriminalizing Prostitution on STIs

These effects are also theoretically ambiguous. If sexual violence is positively correlated with the size of the market for sex workers, then decriminalization will increase sexual violence. However, decriminalization could lead to a safer environment for sex workers, and could encourage sex workers to cooperate with police in the reporting and apprehension of persons who commit sexual violence.

The Theoretical Effects of Decriminalizing Prostitution on Sexual Violence

The two main concerns about decriminalizing prostitution are: (1) whether it will raise or lower sexually transmitted infections (STIs) and (2) how it will affect sexual violence. Researchers are also interested in how the market will be affected, including composition, size, and pricing.

University of Oklahoma

Although still illegal in most areas of the U.S., the market for prostitution is thriving. Like in many places, the advent of the internet has aided the transition from outdoor prostitution (i.e., "streetwalking") to indoor prostitution, such as massage parlors and online arrangements. The indoor market makes up approximately 85% of the overall market, which itself generates approximately $14 billion per year in the U.S. alone.

The Market for Prostitution

Cunningham, Scott and Shah, Manisha. Decriminalizing Indoor Prostitution: Implications for Sexual Violence and Public Health, The Review of Economic Studies, Volume 85, Issue 3, July 2018, Pages 1683–1715, https://doi.org/10.1093/restud/rdx065

Decriminalizing Indoor Prostitution: Implications for Sexual Violence and Public Health

Theoretical Effect of Decriminalizing Prostitution

The indoor sex market the exchange of sexual services that takes place indoors, such as massage parlors, brothels, and sexual services from online transactions. The market is called "indoor" in contrast to the stereotypical "outdoor" market of "streetwalking."

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