# **1. Introduction**

Prostitution is often described as the world's oldest profession yet economists have almost never studied it. The neglect of this important market is particularly glaring in the face of the AIDS epidemic and the consensus that commercially purchased sex is central to the spread of the disease in the developing world (World Bank 1997, Jain et. al., 1994). More than 90 per cent of all adult HIV infections are in developing countries and the vast majority of these cases were contracted from heterosexual sex with an infected partner. To date, AIDS has had the greatest impact in Africa where it is estimated that over 2.5 percent of adults have been infected with the disease. Now, however, the disease is thought to be widespread in South Asia where the first case was reported in 1986. Experts believe that without drastic measures South Asia may suffer effects as devastating as those observed in sub-Saharan Africa.

Promoting the use of condoms and other safe sex practices among sex workers is known to be perhaps the most effective method of preventing the spread of the epidemic in the developing world. In India as in most other developing countries, however, men have a strong preference against using condoms. One indicator of this is that despite many decades of extensive government sponsored "family planning" campaigns promoting their use, condoms have not become a commonly used method of contraception. Recent data from a nationally representative sample show, for instance, that only 7% of married couples use condoms, with female sterilization being the most widely used method of contraception (27 per cent), followed by abstinence and other traditional methods (20 per centV. This inherent resistance to using condoms is compounded by a lack of awareness about HIV/AlDS and safe sex practices in the general population<sup>2</sup> . Consequently sex workers who want to practice safe sex potentially face losing a considerable amount of income by doing so. Anecdotal evidence suggests that sex workers could face at least a fifty percent loss in income by practicing safe sex (Bhave et. al, 1995). There are, however, no direct estimates of the size of this disincentive for safe sex.

If effective policies to combat AIDS are to be devised it is, thus, very important to have some knowledge of the size of the compensating differential faced by sex workers who want to use condoms. If the income loss is large, this suggests that HIV/AIDS interventions among sex workers may need to ' International Institute of Population Studies, _National Family and Health Survey (NFHS),_ (1992-93).

2 The NFHS also found that only 36 per cent had heard of AIDS in 1993 (NFHS, 1993). A much smaller proportion were likely to have heard of HIV the virus that causes AIDS and therefore of the best methods of preventing it - though these questions were not asked in the NFHS survey. Another survey did ask more detailed questions and found that though 35 per cent had heard of AIDS only 4 per cent were aware of the HIV virus and of measures to prevent its transmission (Gupta and Mitra, 1998). A third survey of people attending an STD clinic in 1993-94, who would be expected to be more aware of STDs than the general population, found that only 14 per cent knew that condoms were effective in preventing HIV transmission (Grover et.al. xx).

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