This dissertation investigates how policies and regulation can impact both firm and worker behavior in the illegal black market for commercial sex.

In the first chapter, "Optimal regulation of illegal goods: the case of massage licensing and commercial sex," I analyze how regulating barriers to entry can alter market structure and risk-taking behavior in the black market for commercial sex, and consequently impact associated health and crime externalities. Despite its illegality, prostitution is a multi-billion dollar industry in the U.S. A growing share of this black market operates covertly behind massage parlor fronts. I examine how changes to licensing in the legal market for massage parlors can impact the total size and risk composition of the black market for prostitution, which operates either illegally through escorts or quasi-legally in massage parlors. I find that lower barriers to entry for massage parlors makes the black market for prostitution larger, but also less risky. Consequently, the incidence of gonorrhea and rape falls in the general and sex worker populations, and the incidence of chlamydia falls in the predominant sex worker demographic.

In the second chapter, "Product differentiation by legal status: estimating the demand for commercial sex," I model the quasi-legal and illegal sectors of prostitution as a differentiated product demand system. I use a Logit model and online review data from California to estimate the own-price and cross-price elasticities of demand for quasi-legal and illegal prostitution. I instrument for prices using two marginal cost variables -- massage licensing fees, and the interaction between fees and the adult Asian population. I find that demand for quasi-legal prostitution is highly elastic and weakly substitutable with illegal prostitution.

In the third chapter, "Reducing the risk premium for unprotected sex through community-based HIV prevention: evidence from India and Ecuador," I further examine the risk behavior and health outcomes of commercial sex workers, however in the context of developing countries. Using individual survey data from two randomized control trials in India and Ecuador, I document how community-based HIV prevention programs helped reduce the risk premium for unprotected sex. As a result, condom use increased and the incidence of syphilis decreased among sex workers. I explore the possible mechanisms for this change, such as health education, sex worker empowerment, and income