Low-Income Demand for Local Telephone Service: Effects of Lifeline and Linkup
AbstractA comprehensive data set on local telephone service prices is used to evaluate the effect of Lifeline and Linkup programs on the telephone penetration rates of low-income households in the United States. Lifeline and Linkup programs respectively subsidize the monthly subscription and initial installation charges of eligible low-income households. Telephone penetration rates are explained by an estimated nonlinear function of local service characteristics (including subsidized prices) and the demographic composition of low-income populations. Empirical specification is based on an underlying discrete choice model of household demand for telephone service and an exact aggregation across demographic groups. A generalized method of moments estimator corrects for endogeneity and clustered heteroskedastic residuals. Estimated median price elasticity of demand for telephone service is -0.027 for the monthly charge and -0.008 for the connection charge. A policy simulation predicts that low-income telephone penetration rates would be 6.24% lower without Lifeline and Linkup. The analysis also suggests that Linkup is more cost-effective than Lifeline, and that low-income penetration would increase significantly if all states were to automatically enroll eligible households in Lifeline and Linkup programs.
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Bibliographic InfoPaper provided by Stanford Institute for Economic Policy Research in its series Discussion Papers with number 07-032.
Date of creation: Jan 2008
Date of revision:
telephone service; low-income; lifeline; linkup;
Other versions of this item:
- Daniel Ackerberg & Michael Riordan & Gregory Rosston & Bradley Wimmer, 2009. "Low-Income Demand for Local Telephone Service: Effects of Lifeline and Linkup," Discussion Papers 08-047, Stanford Institute for Economic Policy Research, revised Aug 2009.
- H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
- H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
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