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Why Do the Poor and the Less-Educated Pay More for Long-Distance Calls?

Author

Listed:
  • Hausman Jerry A.

    () (MIT)

  • Sidak J. Gregory

    () (American Enterprise Institute)

Abstract

The benefits of competition among the long-distance interexchange carriers (IXCs) are not realized equally by all their customers. Despite the declines in rates under the discount plans, we document that basic message toll service (MTS) rates have been rising for several years. We show that poorer and less educated customers pay more than better educated and more affluent customers. We suspect that the reason for this correlation is that they are more apt to pay the MTS rates or other high rates, and we present some preliminary evidence that this tendency explains the correlation that we find. We also present evidence that the payment differences exist even after controlling for usage. These findings are significant because it seems likely to us that these two patterns (rising MTS rates and higher payments by the poor and the less educated) will each be ameliorated by the entry of the regional Bell operating companies (RBOCs) into long-distance markets—a state-by-state regulatory process that was nearly complete as of the beginning of 2004.

Suggested Citation

  • Hausman Jerry A. & Sidak J. Gregory, 2004. "Why Do the Poor and the Less-Educated Pay More for Long-Distance Calls?," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 3(1), pages 1-29, April.
  • Handle: RePEc:bpj:bejeap:v:contributions.3:y:2004:i:1:n:3
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    Cited by:

    1. Glenn Ellison, 2005. "A Model of Add-On Pricing," The Quarterly Journal of Economics, Oxford University Press, vol. 120(2), pages 585-637.
    2. Kondylis, Florence, 2005. "Agricultural returns and conflict: quasi-experimental evidence from a policy intervention programme in Rwanda," LSE Research Online Documents on Economics 19878, London School of Economics and Political Science, LSE Library.
    3. Harding, Matthew & Lamarche, Carlos, 2009. "A quantile regression approach for estimating panel data models using instrumental variables," Economics Letters, Elsevier, vol. 104(3), pages 133-135, September.
    4. Paul Zimmerman, 2008. "Strategic incentives under vertical integration: the case of wireline-affiliated wireless carriers and intermodal competition in the US," Journal of Regulatory Economics, Springer, vol. 34(3), pages 282-298, December.

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