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

Aug 2009
Working Paper
By  Daniel Ackerberg, Michael Riordan, Gregory Rosston, Bradley Wimmer
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.