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Estimating the Impact of Low-Income Universal Service Programs

Author

Listed:
  • Daniel A. Ackerberg
  • David R. DeRemer
  • Michael H. Riordan
  • Gregory L. Rosston
  • Bradley S. Wimmer

Abstract

This policy study uses U.S. Census microdata to evaluate how subsidies for universal telephone service vary in their impact across low-income racial groups, gender, age, and home ownership. Our demand specification includes both the subsidized monthly price (Lifeline program) and the subsidized initial connection price (Linkup program) for local telephone service. Our quasimaximum likelihood estimation controls for location differences and instruments for price endogeneity. The microdata allow us to estimate the effects of demographics on both elasticities of telephone penetration and the level of telephone penetration. Based on our preferred estimates, the subsidy programs increased aggregate penetration by 6.1% for low-income households. Our results suggest that Linkup is more cost-effective than Lifeline and that auto-enroll policies are important, which calls into question a recent FCC (2012) decision to reduce Linkup subsidies in favor of Lifeline. Our study can inform the evaluation of similar universal service policies for Internet access.

Suggested Citation

  • Daniel A. Ackerberg & David R. DeRemer & Michael H. Riordan & Gregory L. Rosston & Bradley S. Wimmer, 2013. "Estimating the Impact of Low-Income Universal Service Programs," Working Papers 13-33, Center for Economic Studies, U.S. Census Bureau.
  • Handle: RePEc:cen:wpaper:13-33
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    References listed on IDEAS

    as
    1. Daniel Ackerberg & Michael Riordan & Gregory Rosston & Bradley Wimmer, 2008. "Low-Income Demand for Local Telephone Service: Effects of Lifeline and Linkup," Discussion Papers 07-032, Stanford Institute for Economic Policy Research.
    2. Lars-Hendrik Roller & Leonard Waverman, 2001. "Telecommunications Infrastructure and Economic Development: A Simultaneous Approach," American Economic Review, American Economic Association, vol. 91(4), pages 909-923, September.
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    More about this item

    JEL classification:

    • L00 - Industrial Organization - - General - - - General
    • L50 - Industrial Organization - - Regulation and Industrial Policy - - - General
    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications
    • L98 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Government Policy
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General

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