A model of Spain-Europe telecommunications

In this study we present a model for the outgoing telephone traffic from Spain to a group of 24 European countries. We use a point-to-point model that incorporates the specific characteristics of the international long distance service and the socioeconomic relationships between Spain and this group of countries, taking into account the simultaneity between incoming and outgoing traffic. Recently available data on minutes of conversation in each direction allow us to use panel data for the period 1981-91. We use an orthogonal deviations estimator with instrumental variables. The orthogonal deviations transformation allows the specific unobservable characteristics of each route of traffic to be controlled and the instrumental variables take care of the simultaneity between incoming and outgoing traffic. We estimate a total elasticity of the minutes of outgoing traffic per line with respect to its own real price of - 0.81. Other significant variables are: the volume of trade, the number of visitors from each country, the number of foreign residents and the minutes of incoming traffic. This last variable measures the so-called reciprocal calling effect which is highly significant with a positive elasticity of 0.78.