Why Do the Poor and the Less-Educated Pay More for Long-Distance Calls?

Contributions in Economic and Policy Research, Vol. 3, No. 1, Article 3, pp. 1-26, 2004

26 Pages Posted: 25 Jan 2002 Last revised: 2 Nov 2009

See all articles by Jerry A. Hausman

Jerry A. Hausman

Massachusetts Institute of Technology (MIT) - Department of Economics; National Bureau of Economic Research (NBER)

J. Gregory Sidak

Criterion Economics, L.L.C.

Date Written: 2004

Abstract

The benefits of competition among the long-distance interexchange carriers (IXCs) are not realized equally by all their customers. Despite the declines in rates under the discount plans, we document that basic message toll service (MTS) rates have been rising for several years. We show that poorer and less educated customers pay more than better educated and more affluent customers. We suspect that the reason for this correlation is that they are more apt to pay the MTS rates or other high rates, and we present some preliminary evidence that this tendency explains the correlation that we find. We also present evidence that the payment differences exist even after controlling for usage. These findings are significant because it seems likely to us that these two patterns (rising MTS rates and higher payments by the poor and the less educated) will each be ameliorated by the entry of the regional Bell operating companies (RBOCs) into long-distance markets - a state-by-state regulatory process that was nearly complete as of the beginning of 2004.

Keywords: competition, regulation

JEL Classification: D6,D63,J7,J78,J79,K2,K23,L1,L4,L44,L5,L51,L9

Suggested Citation

Hausman, Jerry A. and Sidak, J. Gregory, Why Do the Poor and the Less-Educated Pay More for Long-Distance Calls? (2004). Contributions in Economic and Policy Research, Vol. 3, No. 1, Article 3, pp. 1-26, 2004. Available at SSRN: https://ssrn.com/abstract=296368 or http://dx.doi.org/10.2139/ssrn.296368

Jerry A. Hausman

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

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J. Gregory Sidak (Contact Author)

Criterion Economics, L.L.C. ( email )

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Washington, DC 20006
United States
(202) 518-5121 (Phone)

HOME PAGE: http://www.criterioneconomics.com

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