Bradley S. Wimmer

The "State" of Universal Service

The introduction of competition forces regulators to address the historical practice of using of implicit cross subsidies to maintain uniformly low local telephone service rates. The Federal Communications Commission recently adopted rules to remove a portion of these implicit subsidies by adopting an explicit universal service program. This program, however, only addresses a small portion of the problem and leaves to the states problems associated with intrastate cross subsidies. In this paper we examine several alternative universal service programs that states may adopt. Overall, we find that universal service programs that base subsidy dollars on the cost of providing service have little effect on telephone penetration rates and result in large taxes, which distort market outcomes and drive those paying into the system from the network. Large universal service programs also cause competitive distortions. Furthermore, we find that cost-based mechanisms do an equally poor job when we use normative criteria, such as the effect the programs have on the distribution of income.

Previous Marriage and the Lesbian Wage Premium

This paper provides insight into the wage gap between partnered lesbians and other groups of women. Using data from the 2000 Decennial Census, we find that wages of never-married lesbians are significantly higher than wages of previously married lesbians and other groups of women. Results indicate that controlling for previous marriage reduces the estimated lesbian wage premium by approximately 20 percent. Our research also reveals that wage patterns of previously married lesbians mirror those of cohabiting heterosexual women. Overall, our results are consistent with the notion that the lesbian wage premium is driven, in part, by differences in the labor-market commitment of lesbians and heterosexual women.

The Effect of Private Interests on Regulated Retail and Wholesale Prices

This paper examines how regulators behave in markets when there is a tension between retail competition and cross subsidy. Using retail and wholesale prices from regional Bell operating company territories and price‐cost margins as a proxy for political influence, we find that private interests influence the structure of retail prices, especially favoring rural residential customers. Political influence also extends to wholesale access prices, although the magnitude of its effect is small. Federal high‐cost universal service payments to a state do not reduce prices in that state’s rural areas but instead lower urban business prices.

Minimum-wage increases and employment in franchised fast-food restaurants

Card and Krueger’s (1994) result that employment is unaffected by an increase in the minimum wage in the franchised fast-food restaurant industry appears to be inconsistent with conventional economic analysis. I take a closer look at the franchised fast-food industry and argue that the presence of brand-name capital does not allow franchisees to substitute away from labor or decrease the level of services provided to customers — employment levels in franchised fast-food restaurants are closely tied to sales.

Local telephone rate structures: before and after the Act

Abstract This paper examines how the structure of local telephone rates has changed in the four years following passage of the Telecommunications Act of 1996. Data on local rates as they stood at the end of 1995 and in 2000 for the Bell Operating Companies in 45 states and the District of Columbia and estimates of wire-center-level costs from the Federal Communication Commissions cost model show that large urban-to-rural and business-to-residential inequities are embedded in local rates. In the average state, rates in its high-cost areas are lower than rates in its low-cost areas. This disparity in rates grows as the relative cost of serving a states rural customers increases. Residential rates are equal to about one-half the business rate, holding costs constant. Interestingly, costs in outlying areas appear to have a larger impact on urban rates than the cost of serving urban customers. The evidence suggests that states are in the process of rebalancing business and residential rates. These efforts are more pronounced in states that allowed competition before 1996. The data suggest that the rebalancing process is incomplete.

Evidence of Adverse Selection from Thoroughbred Wagering

Previous research has shown the thoroughbred sales market to be affected by adverse selection. In the market, sellers who race as well as breed thoroughbreds will choose to keep thoroughbreds when their estimated private values exceed expected sales prices. The presence of asymmetric information leads these sellers to sell their low-quality horses and keep their best for racing. We extend the analysis by examining how bettors use similar information when wagering on thoroughbred races. We show, using a sample of two-year-old maiden races, that homebreds (those horses kept by their breeders for racing) are favored over otherwise similar nonhomebreds.

Effect of Network Unbundling on Retail Prices: Evidence from the Telecommunications Act of 1996

This paper empirically examines the effects of network unbundling on retail prices in U.S. local telephone markets. Panel data for 7,604 wire centers in 43 states from 1996 to 2002 are used to estimate the price effects from the unbundling and entry-promoting conditions of the Telecommunications Act. Results show that Section 271 led to the rebalancing of prices between customer groups in which residential prices increased and the prices paid by small businesses decreased. There is some rebalancing of prices between urban and rural regions, with business prices decreasing by a larger amount in urban regions. Our results from all markets indicate that regulators responded rationally to competition by rebalancing prices to reduce cross subsidies.

Adverse Selection, Seller Effort, and Selection Bias

Several studies (Genesove 1993; Chezum and Wimmer 1997) use evidence of a correlation between seller characteristics and prices as evidence of adverse selection. This approach ignores the effect seller effort might have on the quality of goods sold. We develop a theoretical framework that accounts for both adverse selection and seller effort and provide a set of conditions under which sellers, who more likely adversely select the goods they sell, produce higher quality goods. Empirically, adverse selection emerges as a special case of selection bias. To disentangle the effects of adverse selection from seller effort, we employ a unique data set that allows us to model the selection decision explicitly. The evidence suggests that both adverse selection and hidden effort play important roles in the market for thoroughbred racehorse prospects.