A hybrid legislative model for the sex market: policy and fiscal insights

Abstract This study investigates the Italian sex market and its current legislative framework, offering policy recommendations aimed at protecting sex workers from exploitation and preventing human trafficking. We compare alternative European regulatory models to identify their core components and adopt a trade-off framework to explicitly assess whose welfare would be affected by the proposed reform. Based on our analysis, we find that several stakeholders would benefit from the adoption of a hybrid legislative model that combines (i) regulation and licensing of sex services with (ii) a system of incentives and disincentives designed to guide both workers and clients toward the formal market. According to our budget impact analysis, if implemented in 2024, this policy reform could generate between €3.893 and €7.410 billion in income, with estimated tax revenues under a flat-rate regime would fall between €0.875 and €1.470 billion.