Demand for international telephone services between US and Africa

Abstract This paper uses a two-equation dynamic simultaneous equation model that accounts for call externality and arbitrage, and a dynamic panel estimator to investigate the demand for international telephone calls between the US and African countries. Using panel data from 45 African countries over the 1992–1996 period, we find that the demand for telephone calls from African countries to the US is price elastic while the demand for telephone calls from the US to African countries is price inelastic. We find telephone calls originating from African countries to the US are complementary to calls from the US to African countries while calls originating in the US to African countries are substitutes for calls to the US that originate in African countries, and calls between the two sets of countries exhibit reciprocal and arbitrage effects. We also find that the demand for telephone calls between the US and African countries show strong dynamic effects. Finally, we find that telephone demand between African countries and the US responds positively to income and trade. Our results have interesting research and policy implications.

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