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

Aug 2009
Working Paper
08-047
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.