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Low-Income Demand for Local Telephone Service: Effects of Lifeline and Linkup

  • Daniel Ackerberg

    (Economics Department, University of Arizona)

  • Michael Riordan

    (Department of Economics, School of Arts and Sciences, Columbia University
    Finance & Economics Department, Graduate School of Business, Columbia University)

  • Gregory Rosston

    ()

    (Stanford Institute for Economic Policy Research, Stanford University)

  • Bradley Wimmer

    (Department of Economics, St. Lawrence University)

This study evaluates the effect of the “Lifeline” and “Linkup” subsidy programs on telephone penetration rates of low-income households. It is the first to estimate low-income telephone demand across demographic groups using location-specific Lifeline and Linkup prices. The demand specifications use a discrete choice model aggregated across demographic groups. GMM estimators correct for the possible endogeneity of subsidized prices. A simulation predicts low-income telephone penetration would be 4.1 percentage points lower without Lifeline and Linkup. Results suggest that Linkup is more cost-effective than Lifeline, and that automatic enrollment in the programs increases penetration.

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File URL: http://www-siepr.stanford.edu/repec/sip/08-047.pdf
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Paper provided by Stanford Institute for Economic Policy Research in its series Discussion Papers with number 08-047.

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Date of creation: Aug 2009
Date of revision: Aug 2009
Handle: RePEc:sip:dpaper:08-047
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  1. Jerry A. Hausman, 1979. "Individual Discount Rates and the Purchase and Utilization of Energy-Using Durables," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 33-54, Spring.
  2. Wimmer, Bradley S. & Rosston, Gregory L., 2005. "Local telephone rate structures: before and after the Act," Information Economics and Policy, Elsevier, vol. 17(1), pages 13-34, January.
  3. Murphy, Kevin M & Topel, Robert H, 1985. "Estimation and Inference in Two-Step Econometric Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 3(4), pages 370-79, October.
  4. Burton Mark & Macher Jeffrey & Mayo John W, 2007. "Understanding Participation in Social Programs: Why Don't Households Pick up the Lifeline?," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 7(1), pages 1-28, November.
  5. Gregory L. Rosston & Scott J. Savage & Bradley S. Wimmer, 2008. "The Effect of Private Interests on Regulated Retail and Wholesale Prices," Journal of Law and Economics, University of Chicago Press, vol. 51(3), pages 479-501, 08.
  6. Eriksson, Ross C & Kaserman, David L & Mayo, John W, 1998. "Targeted and Untargeted Subsidy Schemes: Evidence from Postdivestiture Efforts to Promote Universal Telephone Service," Journal of Law and Economics, University of Chicago Press, vol. 41(2), pages 477-502, October.
  7. Cain, Paul & Macdonald, James M, 1991. "Telephone Pricing Structures: The Effects on Universal Service," Journal of Regulatory Economics, Springer, vol. 3(4), pages 293-308, December.
  8. Hausman, Jerry & Tardiff, Timothy & Belinfante, Alexander, 1993. "The Effects of the Breakup of AT&T on Telephone Penetration in the United States," American Economic Review, American Economic Association, vol. 83(2), pages 178-84, May.
  9. Garbacz, Christopher & Thompson, Herbert G, Jr, 2003. "Estimating Telephone Demand with State Decennial Census Data from 1970-1990: Update with 2000 Data," Journal of Regulatory Economics, Springer, vol. 24(3), pages 373-78, November.
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