Supply Side of Child Trafficking: Economic Analysis using Utility Models

Author:  Lock Wan Jun

Date:  April 2008


This paper analyses the trafficking of children across borders to become prostitutes. This is an important political, economic, and humanitarian issue as large numbers of children in poor countries are lured into the sex trade by unscrupulous traffickers who take advantage of the children's vulnerabilities. Children trafficked for prostitution suffer from physical and emotional trauma, lack educational opportunities, and are likely to end up at the bottom rungs of society for the rest of their lives . It is therefore imperative that trafficking of children into the sex industry be curbed. First, possible utility models of traffickers are used to explain why traffickers continue in their trade despite stiff penalties. The four utility models discussed are Becker's model, modified version of Becker's model by Brown and Reynolds, Heineke's model and Ehrlich's model. The general conclusion is that traffickers derive positive net utility from trafficking, assuming that the traffickers are rational, utility-maximizing individuals. This can be attributed to the low probability of being caught and the huge gains involved which are shown in the first three models. On the other hand, Ehrlich's model focuses on how the criminal allocates time devoted towards legal and illegal activities in order to maximize utility. The four models thus give different perspectives into how trafficking should be curbed. Next, possible laws and penalties that directly target the abovementioned factors are proposed in order to deter trafficking. In addition, possible ways to empower vulnerable children are discussed. By empowering potential victims, they will be less susceptible to being lured into the sex trade by traffickers.


In recent years, there has been an explosion in the demand for child prostitutes by sex tourists. Child prostitutes are perceived to possess rejuvenating powers to cure illnesses and bring prosperity. Some people also believe they will not contract the sexually transmitted Acquired Immune Deficiency Syndrome (AIDS) from child prostitutes, as children are seen to be "pure". Traffickers thus leverage on the surge in demand and began to traffic children across borders in large numbers. According to a recent United States government report, at least 800,000 to 900,000 people, mostly young women and children, are trafficked worldwide annually (Anti-Slavery: Today's Fight for Tomorrow's Freedom, 2003). In this paper, I focus on the supply side of the trafficking of young victims across borders, after which they are lured into the sex trade. Trafficking is defined by the United Nations as the buying or selling of a person for exploitation (DPKO Policy Paper, 2004). The employments of force, coercion and deception against victims are characteristic of trafficking cases.

The first part of this paper analyses possible models of the utility functions of traffickers to explain why they continue in their trafficking activities despite the criminalization of trafficking in many countries and the stiff penalties involved. This is helpful as utility functions take into account the utility the traffickers gain if they succeed, the profit from their trafficking activities and the disutility they suffer if they are caught and punished.

Over the years, sociologists and psychologists have been trying to using non-quantitative methods aimed at finding root causes behind trafficking, which may be difficult given that the profiles of the traffickers are very diverse and they operate in complex clandestine networks. By applying utility models, one can possibly manipulate the gains and losses involved in trafficking; the probability of the traffickers being caught; the level of punishment meted out and the availability and profitability of legal activities in order to deter trafficking, without having to know the root causes of trafficking. As trafficking is still rampant, it is likely that traffickers derive positive net utility from their activities. By analyzing the factors that contribute to positive net utility, the paper proceeds to suggest possible laws and penalties that directly target these factors. By employing the appropriate laws and penalties, greater efficiency in punishing and deterring offenders will be achieved.

The paper finally focuses on the children who are often victims of poverty and are thus susceptible to false hopes of better prospects abroad. Possible ways to empower these children economically and educationally to make it harder for traffickers to lure them into the sex trade are discussed.


In Southeast Asia where trafficking is a major problem, traffickers operate in highly organized criminal networks, targeting young girls and women. Nationals in destination countries often work with traffickers in recruiting young prostitutes. For instance, one syndicate believed to have a network of recruiters and runners in the Philippines and Singapore recruits young Filipinas with false promises of jobs as actresses, singers, and shop assistants in Singapore. Instead, they are lured into prostitution in Singapore (The Protection Protect, 2007). Some traffickers are ordinary people whom the victims know personally. In Myanmar, fellow villagers or even friends and relatives are known to lure unsuspecting children and women with false promises of high-paying occupations like waitressing in Thailand. Instead, they are sent to Thai brothel gangs (Brown, Hamot & Sok 2004).

In addition, female traffickers are a growing phenomenon. They are women who were previously victims of trafficking and exploitation in the sex trade and now make a career out of trafficking children. These women return to their home countries appearing wealthy and successful, and lure girls into the sex trade through trickery. Such occurrences are common in Eastern Europe (Hughes, 2000).

After the traffickers lure victims out of their home countries, they sell the children to slaveholders dealing in commercial sex, namely the pimps or owners of strip clubs, sex bars, brothels, karaoke clubs, or massage parlors. Most traffickers have a steady relationship with the slaveholder; hence they know who to sell the trafficked children to. Some traffickers even recruit children for their own "retail" sex shop. After the children are trafficked, the slaveholders take complete control of the child's life. Documents like passports, birth certificates and identity cards are seized from the children. The children are closely guarded, making escape difficult. Even if the children escape successfully, they have no money, do not speak the local language, and are unaware of who to approach for help.

Economic analysis: the motivation behind trafficking activities

Four possible economic models can be used to explain why traffickers persist in their crime despite stiff penalties implemented in many countries in recent years.

Becker's model

In Becker's model (1968), the individual is assumed to be a rational utility maximiser. Thus the individual weighs the costs and benefits before deciding whether to engage in an activity. In Becker's model, utility is a function of income. The expected utility from trafficking children across borders is as follows:

E(U) = p[U(Y – f)] + (1-p)[U(Y)]

In this equation, U is the trafficker's von Neumann-Morgenstern utility function, E(U) is expected utility, p is the probability of being caught and punished, Y is the monetary and psychic income (monetary equivalent) from the offence, and f is the monetary equivalent of the punishment.

The individual will commit the offence if his expected utility from it is positive, i.e. E(U) is greater than 0. Becker's model enables us to see that by varying p and f, E(U) and hence the individual's preferences towards crime will change.

However, Becker's model does not take into account other important factors such as time and wealth of the traffickers. Therefore, it is very limited in scope and is thus not suitable for use if other factors are to be considered too.

Nevertheless, Becker's model is useful as a starting point as it shows us that increasing the probability of being caught and the severity of the punishment meted out deter offenders by decreasing their expected utility. This has important implications in determining the appropriate punishment and deterrence measures, which will be discussed later in this paper.

Modified version of Becker's model (Brown and Reynolds)

Here, the trafficker's initial wealth or income position is taken into account. According to Brown and Reynolds (1973), the trafficker's initial wealth is defined as W0. If he commits an offence and escapes detection, the monetary value of his gain is G. If he is caught and punished, his loss is L. The probability of getting caught is p. Here, utility is a function of wealth. The trafficker's expected utility is denoted below:

E(U) = p[U(W0 – L)] + (1- p)[U(W0 + G)]

The trafficker will commit the crime if his expected utility from trafficking is greater than the utility he obtains when he does not commit any crime. This occurs when E(U) is greater than U(W0), where U(W0) is his utility level if he does not commit any offence. This is true for both risk-averse and risk-loving traffickers. For a more detailed analysis of the model, refer to the appendix.

Thus detection methods which affect p and deterrence measures which affect both p and L must be sufficiently large in order to decrease expected utility and hence effectively reduce the propensity of traffickers to continue in their trade.

A portfolio choice model of crime (Heineke's model I)

In Heineke's model (1978), the trafficker decides the proportion z of his exogenous wealth W0 to allocate to trafficking activities. Here, the profits, or gains, from trafficking is denoted by the function G(z:α). An increase in α will cause G(z:α) to shift in the positive direction, increasing the potential gains that could be obtained without changing z. Here, we assume that G(z:α) is always positive and increases as z increases. On the other hand, his losses are represented by F(z:β). An increase in β will cause F(z:β) to shift in the positive direction, increasing the losses that could be obtained without changing z. Again, we assume that F(z:β) is always positive and increases as z increases. Using p to represent the probability of getting caught and punished, we obtain the expected utility function:

EU(W) = p[U(W0 + G(z:α) - F(z:β)] + (1-p)[U(W0 + G(z:α)]

When the severity of punishment is increased, β increases, causing F(z:β) to increase too. On the other hand, α decreases when factors independent of z cause profit, which is represented by G(z:α), to decline. In both scenarios, the trafficker's expected utility from trafficking decreases, which might deter him from trafficking. For a more detailed analysis of the model, refer to the appendix.

Ehrlich's model

Ehrlich (1973) constructed a crime model which is similar to that of the three models discussed above, but with the additional restriction that the total amount of time allocated to legal and illegal activities is fixed. This implies that if the time allocated to legal activities increase, the time allocated to illegal activities has to decrease. The gains and losses to both legal and illegal activities are functions of the time allocated to them. In this case, the illegal activity is trafficking. Excluding the shift parameters, we obtain the following:

Ws = W0 + L(t – t1) + G(t1) and Wu = W0 + L(t – t1) + G(t1) – F(t1)

In this equation, W0 is the trafficker's initial wealth, t is the total amount of time devoted to legal activities and trafficking (a constant), t1 is the amount of time allocated to trafficking, L(t – t1) is the gain obtained from allocating (t – t1) units of time to legal activities, G(t1) is the gain obtained from allocating t1 units of time to trafficking, F(t1) is the loss incurred from being caught and punished for trafficking, Ws is the trafficker's wealth if he succeeds in trafficking, and Wu is the trafficker's wealth if he is caught trafficking and punished for it.

This gives rise to a concave transformation curve ABC. Point A represents a point where t1 = 0 and so t = t – t1, where the individual spends all his time on legal activities. On the other hand, at point C, t = t1, where the individual spends all his time on trafficking. The further the individual is from point A, the greater is the amount of time allocated to trafficking activities.

Figure 1: Ehrlich's model showing how the optimum distribution of legal and illegal activities is derived

Figure 1: Ehrlich's model showing how the optimum distribution of legal and illegal activities is derived

Utility is denoted by downward sloping indifference curves. Each utility curve represents a combination of Ws and Wu that give the same level of utility. The further the utility curve is to the right, the higher is the utility.

The point B where the indifference and transformation curves are tangent to each other is where utility is maximized. Therefore, a utility-maximizing trafficker will allocate his time between legal activities and trafficking activities till he reaches point B. Ceteris paribus, if the returns to legal activities increase, it will lead to an increase in L(t – t1) and subsequently a pivotal outward shift of the transformation curve to A'BC as shown above. The individual is now at a higher utility function U2, and the point where he maximizes his utility is B'. A' represents the point where the individual specializes in legal activities. Here, we notice that B' is closer to A' than B is to A. This shows that when the returns to legal activities increase, the individual will allocate more time to legal activities and less time to illegal activities. For a more detailed analysis of the model, refer to the appendix.

Evaluation of crime models

The four crime models discussed above are generic crime models that can be applied to all kinds of criminal activity. In this paper, the crime models are applied to child trafficking because child trafficking is regarded as a crime.

Out of the four models, Ehrlich's model is the most interesting since it takes into account the time allocated to legal and illegal activities. This time allocation factor is not reflected in the other three models. By taking time allocated to legal and illegal activities into consideration, Ehrlich's model provides a strong case for increasing the returns to legal activities and providing greater assess to legal activities, on top of the conventional use of increasing punishment and probability of catching the traffickers. Ehrlich's model thus supports the arguments of economists who believe that arrest and punishment are insufficient and ineffective crime deterrent measures.

All four models function on the basic assumption that traffickers are rational and seek to maximize their own utility. However, this may not hold in the real world because some traffickers may lack the knowledge and/or rationality to maximize their utility. As a result, they may undertake actions that do not maximize their utility.

Despite the theoretical limitations of the four models, they can still help us in understanding why trafficking is prevalent despite the harsh penalties involved. This is because in reality, most traffickers are interested in maximizing their profits from trafficking. Therefore, the prevalence of trafficking implies that the traffickers' net utility from trafficking is likely to be positive. This could be that the likelihood of being arrested and the severity of the punishment are small while the potential gains are huge, resulting in an overall positive net utility.

Are current measures to catch traffickers ineffective?

In the four economic models previously discussed, p denotes the probability of being caught and punished. Therefore, even though trafficking is a crime in many countries and measures are in place to capture traffickers, many traffickers escape uncaught. The low risk of getting arrested has encouraged many traffickers to join and continue in their illicit business. This is caused by poor law enforcement, corrupt officials who collaborate with the traffickers, reluctance of victims and locals to report cases to the police and lack of political conviction to address the trafficking problem.

Laws to combat trafficking exist in many of the affected countries, but they are poorly enforced. Hundreds of thousands of children are believed to be working in the sex trade in Cambodia, Indonesia, Thailand, Vietnam, Philippines and so on. In these countries, police and courts have to grapple with drug, murder and other serious crimes. As a result, too few policemen and resources are allocated to cracking down on child-sex traffickers. Therefore, very few traffickers are caught. Even if they are arrested, they are often caught individually, while the extensive trafficking networks remain elusive.

There is also the problem of corruption, which renders even the stiffest measures to prosecute offenders ineffective. In Cambodia and other Southeast Asian nations, senior authority figures accept bribes and even manage, protect or assist trafficking syndicates. At the borders, police and immigration officials take bribes and in turn facilitate the illegal passage of children. In Myanmar, police and immigration agents at the border not only aid in the passage of women and girls to Thailand, but also protect the operation of Thai brothels (Asia Watch and the Women's Rights Project, 1993). In the case of the Philippines, immigration officials at the Ninoy Aquino Philippines International Airport are suspected of colluding with South Korean sex rings.

An analysis on legal enforcement in many countries reveals that they often end up working in favour of the traffickers rather than the victims. In Macedonia, police are reluctant to raid brothels because they fear ruining the uneasy peace between the Slavs and the Albanian minority. Even when the police intend to raid, corrupt policemen usually inform the brothel owners beforehand so they can hide themselves and their prostitutes in secret exits (iAbolish, 2007).

Furthermore, even if the local law enforcement is supportive of victims, victims may not know that they can turn to the police for help, as they are usually threatened by the traffickers that reporting to the police will only bring more trouble. In addition, the victims themselves often do not report the traffickers to the police. This is evident in Greece, where the law imprisons, deports, and prohibits trafficking victims from re-entering Greece, causing victims to be reluctant to alert the police (iAbolish, 2007).

To make matters worse, some governments lack the political will to address trafficking issues and embark on legislative and policy reform. According to the American-based human-rights group Asia Watch, the Thai government is turning a blind eye to the trafficking of women and girls from Myanmar to Thailand in forced prostitution (TED Case Studies, 1997). Furthermore, the border controls between Thailand and Myanmar are stationed by corrupt police on both sides. According to Asia Watch, despite evidence of direct official involvement in every stage of the trafficking process, few Thai officers have been caught and punished for their corrupt activities.

Are the monetary benefits to traffickers large?

The United Nations estimates that trafficking in people generates US$7 billion per year. Trafficking is claimed to be the third largest source of profit for crime organizations, behind the sale of guns and drugs (iAbolish, 2007). Such a large estimate is given because after trafficking the victims, traffickers often exploit their victims' labour for other criminal activities such as selling drugs.

In Thailand, travel agents actively promote child sex tourism, fuelling demand for child prostitutes from tourists (iAbolish, 2007). As a result, brothels increase their demand for child prostitutes and are willing to pay a higher price for them. This leads to higher potential profits and hence higher expected utility for traffickers, attracting more traffickers to enter and continue in the trade.

Are existing punishments for caught traffickers too lenient?

Many countries impose jail terms ranging from five to twenty years on traffickers. However, it is possible that these penalties may be too lenient or are not enforced properly, hence failing to serve a strong deterrence effect. Trafficking is prohibited in Estonia and Georgia with maximum penalties of 12 years' imprisonment. In Albania, traffickers can be jailed from five to 15 years (Montgomery, 2001). However, corruption and lack of government protection for victims has made it difficult for cases to be brought to trial and successfully prosecuted.

Several international laws, which seek to curb and prevent trafficking, have been enacted. In essence, these laws should be sufficient to combat the trafficking problem. Unfortunately, several countries have not ratified or implemented the laws. Others do not recognize them and a few do not observe them despite ratifying them. Because of poor enforcement and the lack of support for the punishment measures in several countries, the value of β in Heineke's model is likely to decrease. This results in a higher expected utility for traffickers, encouraging them to persist in their activities.

Other factors affecting G (gains from trafficking)

The vulnerability of children due to poverty and oppressive social systems at home make them easy targets for traffickers. This increases the value of α in Heineke's model I, which translates to an increase in potential profits. Children from poor and underprivileged homes are easy targets because they are easily lured into the sex trade with lofty promises of a better income and life abroad. This is true for most, if not all, of the countries where children are trafficked across borders.

Extreme poverty allow exploitation of these children, especially those living on the streets (Beddoe, 2006). End Child Prostitution, Child Pornography And the Trafficking of children for sexual purposes (ECPAT) studied child prostitution in Australia by collecting information from early 471 government and non-government agencies working with children. ECPAT's study revealed links between young people being trafficked and youth homelessness, dysfunctional family backgrounds and lack of self-esteem. Worse, parents have been found to sell their own children.

Myanmar is an example of a country where trafficking is rife. Myanmar is a poor country, with an estimated average per capita income of US$600 to US$800 based on purchasing power parity. The adverse socioeconomic conditions in Myanmar increase the likelihood of women and girls being lured into the sex trade. Myanmar's suppressive military regime has caused many ethnic minorities to become economically desperate enough to be recruited into prostitution. Rural women and girls have little education, few economic opportunities and know nothing about AIDS. In many instances, the women and girls approach the traffickers voluntarily. To them, prostitution is an employment option where they can earn more money than through any other work, given their limited education (BBC News UK, 2006).

Poverty is not the only problem in many developing countries. People may also face sexism, oppressive caste systems, domestic abuse, and lack of opportunities. For instance, oppressive social structures in Nepal are a major reason why women are vulnerable to trafficking. Thinking that life abroad would be better than life at home, many are all too ready to believe the traffickers' false promises and become easy targets.

Traffickers incur low costs in finding victims since they are easily swayed by promises of better economic opportunities abroad. High revenues and low costs translate to huge profits for the traffickers. As a result, G increases, which in turn increases the expected utility from trafficking.

Existing measures to punish and deter traffickers Government efforts

Some governments have acknowledged the child sex trafficking problem in their countries. Countries where the governments have passed laws criminalizing trafficking and allocated funds and resources to curb trafficking include the Philippines, Australia and Japan.

The Philippine government passed the Antitrafficking in Persons Act in 2003 (The Protection Protect, 2007). The act introduces policies to eliminate trafficking, establishes the necessary institutional mechanisms to protect and support trafficked victims, and imposes penalties on traffickers. By criminalizing trafficking and with proper enforcement of the proposed stiff punishments, the Act may be effective in deterring traffickers. The Act achieves this by increasing the value of β in Heineke's model, causing the potential losses at every level of crime committed to increase.

In Australia, the government has committed A$24 million over 6 years to counter people-smuggling, trafficking in women, and related transnational crime in the Asia-Pacific region . Australia has also gone one step further in funding human rights monitoring of the legal and judicial system in East Timor and measures to protect the rights of vulnerable women and children in the Philippines, the Solomon Islands, Vanuatu and Vietnam (Coalition Against Trafficking of Women). The A$24 million spent to counter trafficking is likely to increase the probability of the traffickers being caught and punished, which is denoted by p. Australia's intervention in East Timor and the Philippines, the Solomon Islands, Vanuatu and Vietnam may help in making it more difficult and costly for traffickers to seek and recruit victims, since steps have been taken to protect their rights. This has the effect of decreasing the value of α in Heineke's model, thus causing the profits associated with each level of crime to decrease.

In September 2004, the Japanese government announced its plans to send a fact-finding team to the Philippines and Thailand to investigate the problem of child trafficking from these countries into Japan (Downer, 2002). This Japanese team went to Manila to meet with government officials and non-governmental organizations (NGOs) working on the problem. Such cross-border cooperation may increase the probability of the traffickers being caught and prosecuted, since the authorities are now provided with more expertise and other resources from other countries, thus enabling them to be more vigilant and efficient in arresting traffickers.

These efforts, if carried out wholeheartedly and efficiently without being affected by problems like corruption, can serve to increase p and β and decrease α. These cause the expected utility of the traffickers from trafficking to decline. In turn, the incentive for them to persist in their trafficking activities decreases.

International Efforts

There are also attempts to tackle the trafficking problem at the international level, with the help of the United Nations (UN), the International Police Organization (INTERPOL) and the International Labor Organization (ILO) (Eye on UNESCAP, 2005).

Specialized agencies under the UN like the United Nations Children's Fund (UNICEF), United Nations Development Program (UNDP) and World Health Organization (WHO) are analyzing the issues of trafficking and prostitution. Their research may enable the authorities of various countries to gain a further insight into the intricacies behind the trafficking issue and thus enable them to come up with appropriate strategies to deter traffickers or protect potential victims from the traffickers.

On the other hand, INTERPOL has also held several conferences on trafficking and has attempted to coordinate cross-border efforts of law enforcement agencies to curb trafficking in children. Greater cross-border efforts may increase the probability of traffickers being caught and prosecuted.

As for the ILO, it launched a program in 1997 to combat the trafficking and exploitation of children in prostitution and sweatshops in Asia. Such measures seek to increase the likelihood of catching traffickers. The ILO International Program on the Elimination of Child Labor (IPEC) for Asia identified Thailand as the country where the trafficking problem is most serious as many young women and children are trafficked into Thailand as prostitutes annually. The victims are mainly from neighbouring Myanmar, where corruption and lack of proper law enforcement make it easy for traffickers to transport victims out of Myanmar.

Non-Governmental Organizations (NGOs)

Non-governmental organizations (NGOs) sprung up in response to dissatisfaction with government attempts to prosecute traffickers and assist victims. In recent years, local, regional and international NGOs have been at the forefront of efforts to raise awareness of trafficking among people and appeal for governments to take more action (TED Case Studies, 1997).

At the local level, NGOs run programs to warn girls and their families of the dangers of falling prey to trafficking, shelter victims who have successfully escaped, provide medical and psychological care, assist in repatriation of the victims and pressure their governments to strengthen laws against trafficking. NGO efforts are especially crucial if the governments are not putting in enough effort to tackle the problem.

Over the years, local NGOs have found more effective ways of dealing with the trafficking menace. For instance, NGOs in Thailand have achieved significant success in sheltering and repatriating victims and getting the Thai government to take more action. Initially, after the NGOs rescued and sent child victims home, the children often ended up in Thailand again. The children who found their way back either voluntarily or as a result of being trafficked again were mostly from Myanmar and the border areas. Political instability and lax law enforcement in these areas meant that there was no one to care for the repatriated children, causing them to be susceptible to being trafficked again. In response to this, NGOs sheltered trafficked women and girls and found safe, undisclosed ways to send them home. By reducing the vulnerability of victims, the value of α in Heineke's model decreases, as traffickers now find it more difficult and costly to source for victims.

NGOs have also made their presence felt at the international level. In March 1994, the United Nations Commission on Human Rights adopted Resolution 1994/45 in response to demand from NGOs. The Resolution called for the elimination of the trafficking of women and children for prostitution. Appeals from NGOs also led to the appointment of a UN Special Rapporteur on the Sale of Children, Child Prostitution and Child Pornography. Its work has helped put pressure on UN and its member countries to recognize the seriousness of the trafficking problem.

Therefore, NGOs help to fill the gaps left by government inaction and at times influence governments to play a more active role in handling the trafficking menace. Ideally, the efforts of governments and NGOs should deter traffickers by decreasing their expected utility from trafficking. This is achieved by increasing the probability of the traffickers being arrested and decreasing the vulnerability of potential victims.

Suggestions to deter traffickers: an economic perspective

Effective deterrence methods should seek to increase p, the probability of arresting the traffickers, decrease G, the potential gains from successful attempts and increase L or F, both of which denote the potential losses when traffickers are arrested and prosecuted.

Based on his crime model, Becker argued that most criminals rationally weigh the costs and benefits of crime against the costs and benefits of legitimate activities. Therefore, he proposed that to reduce crime, the authorities should increase the likelihood of being caught and punished, thereby increasing the value of p in his model, and increase legitimate opportunities for the traffickers. Economic studies on the USA, Canada and England have shown conclusively that punishment does reduce crime (Wacquant, 2006).

On the other hand, Ehrlich showed that after statistically adjusting for other factors, states with better police protection, higher probability of conviction and imprisonment and longer prison sentences have lower crime rates than states which had more lax controls. He also discovered that this holds true for economically motivated crimes like robbery. Ehrlich's findings are significant because they are in line with the various crime models' prediction that the larger the probability of being caught and the stiffer the punishments, the lower the expected utility of the criminal and hence the less willing he will be to offend. Ehrlich also argued that criminals respond to positive incentives, using the observation that crime rates tended to be low when unemployment rates were low. He thus advocated "equalizing training and earning opportunities independent of any ethical considerations" (Andreano & Siegfried, 1980). This is in line with his model, which implies that when the returns to legitimate activities increase and criminals have better access to them, they will reduce the amount of crime committed or even give up crime altogether.

However, not all economists concur that punishment is an effective crime deterrent measure. Danziger (cited in Andreano & Siegfried 1980) believes that creating more legitimate opportunities is a longer term solution to deter crime, while punishment reduces crime rate only in the short run. Another issue to look into is how to deter convicted traffickers from reverting to their trafficking activities. Economists and social scientists have different views about rehabilitating offenders. Economists, even liberal ones, claim that money spent to rehabilitate offenders is money wasted, pointing to the findings of sociologist Robert Martinson, who did an exhaustive study of prison reforms and concluded that rehabilitation is ineffective. In addition, Cook (cited in Andreano & Siegfried 1980) proposed that the only way to rehabilitate offenders is to increase their chances of securing legitimate jobs after serving their punishment because we lack the knowledge to alter their personalities. He therefore suggested the development of work-release programs for convicts to build up a work record while serving their prison sentences. Indeed, research on the North Carolina work-release program revealed that ex-convicts on work-release were much less likely to re-offend compared to those who did not attend the programs. The research results lend support to Ehrlich's model, which proposes that greater returns and accessibility to legal activities help deter crime.

Economists view rehabilitation as ineffective because they view criminals as rational people; if there are few legitimate opportunities available, or if they feel that they are unable to perform the legitimate jobs, they will revert to crime to make a living. This is again supported by Ehrlich's model, which illustrates that an increase in the returns to legal activities such as higher remuneration will result in traffickers allocating more time to legal activities and less time to trafficking.

Contrary to what sociologists and psychologists think, economists view that society does not need to get to the root causes of criminal behaviour by counseling or rehabilitating criminals. Instead, economists argue that criminals respond to both negative and positive incentives. This explains why economists choose to rely on crime models, as they take into account the positive and negative incentives which can be manipulated to have a deterrence effect. Negative incentives include a higher likelihood of being arrested and more severe punishments while positive incentives include an increase in legitimate opportunities available and an increase in the returns to these legitimate activities. The critical question is to what degree each type of incentive should be emphasized in order to achieve the best results.

Possible ways to empower and protect potential victims

Besides deterring traffickers, another approach would be to empower and protect vulnerable groups from falling prey into the sex trade. Poverty, inadequate education, unemployment and low income are factors contributing to a ready supply of children for trafficking (Beddoe, 2001).

Therefore, the economic solution to empower and protect potential victims is to reduce poverty. First, there is a need for governments and international organizations to increase literacy rates among vulnerable children by constructing more schools and hiring more qualified teachers. The challenge is to convince parents to allow their children to secure an education, as poor parents may prefer their children to work to support the family. With higher education levels, these children will find it easier to secure better paying jobs either within or outside the villages or states they live in. One possible way to create more jobs in poor areas is for governments to attract foreign firms to set up factories and thus provide legitimate occupations for the locals. Just like how providing more legitimate job opportunities may deter traffickers from trafficking, doing likewise for the vulnerable children and young adults may also prevent them from falling prey to the sex trade.


From an economic perspective, traffickers are utility maximizers who weigh the costs and benefits of trafficking activities before deciding whether to engage in them. The prevalence of trafficking implies that the authorities need to work harder and get rid of problems such as corruption in order to increase the likelihood of catching traffickers as shown by Becker's model. The modified Becker's model and Heineke's model provide a strong case for the authorities to increase the punishments meted out at arrested traffickers and do more to protect potential victims from falling prey to traffickers. On the other hand, Ehrlich's model shows that increasing the returns to legitimate activities and creating more of them so that traffickers can gain access to them will decrease the amount of time allocated to crime, which in turn leads to less crimes being committed.

With most of the world's population increase occurring in the poorest countries, there is an abundance of poor and vulnerable children. Therefore, governments, lawmakers, officials, NGOs and even the citizens of countries where child sex trafficking is rife should take more serious and concrete action to tackle the trafficking menace. The best solution seems to be a combination of increasing the probability of arresting the traffickers, increasing the severity of the punishment and providing greater access and returns to legal activities, since these factors have been shown by various research studies to be helpful in reducing crime at least to some extent.


I would like to express my sincere gratitude to Associate Professor Anthony Chin. His kind patience and guidance throughout the research is most appreciated. I would also like to thank my ISM partner, Mr Kwok Dao Yang Jonathan, for sharing his research materials with me and for his valuable comments.


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