Abstract
In 1997 the FCC ordered sharp decreases in international settlement rates (bilaterally negotiated telecommunication rates) between the U.S. and other countries. Developing countries, which received about $35 billion in net settlement payments from U.S. carriers between 1985 and 1998, claim that payments finance telecom investment and that reduced rates, and therefore payments, will harm investment. Using a panel dataset of 179 countries from 1985–1998, I find settlement rates negatively correlated with international telecom traffic, suggesting that reduced rates will stimulate traffic. I also find no evidence that payments finance investment as measured by telephone penetration and telecommunications equipment imports.
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Wallsten, S.J. Telecommunications Investment and Traffic in Developing Countries: The Effects of International Settlement Rate Reforms. Journal of Regulatory Economics 20, 307–323 (2001). https://doi.org/10.1023/A:1011171110899
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DOI: https://doi.org/10.1023/A:1011171110899