Demand for international telephone traffic in Spain: An econometric study using provincial panel data

In this study we model the demand for outgoing international telephone traffic in Spain. We make use of a standard theoretical framework that incorporates the special characteristics of this type of telephone service. Consequently, equations for real expenditure per line and for the number of international calls per line are estimated.We use annual data for the 50 Spanish provinces for the period 1985–1989, and employ appropriate panel data techniques. The selected equations (one for expenditure per line in international traffic and another for the number of international calls per line) pass a battery of diagnostics. We conclude that this type of traffic, whether measured by expenditure per line or by the number of international calls per line, presents both high income and price elasticities. Moreover we find that price and income affect both the number of calls and their average duration.Likewise, we find a significant increase in social welfare when a tariff rebalancing that maintains the profit of the operating company is carried out.