Countries with legalized prostitution are associated with higher human trafficking inflows than countries where prostitution is prohibited. The scale effect of legalizing prostitution, i.e. expansion of the market, outweighs the substitution effect, where legal sex workers are favored over illegal workers. On average, countries with legalized prostitution report a greater incidence of human trafficking inflows.
The effect of legal prostitution on human trafficking inflows is stronger in high-income countries than middle-income countries. Because trafficking for the purpose of sexual exploitation requires that clients in a potential destination country have sufficient purchasing power, domestic supply acts as a constraint.