Prostitution constitutes an abuse on the human rights of all sex workers. It is unfortunate that people need to turn to said profession for income and, even while regulated and institutionalized, it proves to increase the traffic of indentured servitude both willing and (more commonly) unwilling of both men and (mostly) women worldwide. While it is true that prostitution is one of the oldest practices around and that trying to root it out and completely outlaw it akin to alcohol is nonsensical, I disagree with promoting it as a legal, government sanctioned business. Just my 2 cents.
Ethically? No. This is pretty self-explanatory.
In terms of improving the economy? People pay for sex. If prostitution was regulated, and made legal, people wouldn't really be whining about how their government sucks for being money grabbing, or something tinfoil hat-like. It would also greatly diminish the amount of pimps.
Overall? It's a mix of both. I don't think it should be legalized, but at the same time, there are benefits I'm looking at that might improve the economy. I'm leaning more towards it not being legalized because of moral and ethical reasons.