The digital sin city: An empirical study of craigslist's impact on prostitution trends

Online prostitution has flourished due to presence of online intermediaries. Despite the illegality of selling sexual services online, the Section 230 of Communications Decency Act shields websites from liability for unlawful postings by third parties. Consequently, the websites like Craigslist have become a haven for prostitution-related ads. In this paper, we quantify the economic impact of Craigslist's entry on prostitution incidence, and identify potential pathways in which the website affects the sex industry. Using a national panel data for 1,796 U.S. counties from 1999 to 2008, our results suggest that entry of Craigslist to a county is related to 26.61 percent increase in prostitution cases. In addition, our analyses investigates four key market mechanisms, namely the relationship to commercial vice, geographical trends, spillover effects, and enhanced policing efficacy. Our results contributes broadly to the emerging literature that researches the societal challenges associated with online intermediaries and Internet penetration.