The Demand Behavior of Consumers in Peru: A Demographic Analysis Using the QUAIDS

This paper models the demand behaviour of consumers in Peru. To that end, we estimate a demographic version of the Quadratic Almost Ideal Demand System (QUAIDS) using one Peruvian cross-section from 1997. Our results indicate first that the rank two AIDS model is rejected in favour of the rank three demographic QUAIDS model. Secondly, the income elasticities reveal that Transport and Leisure are luxury goods, whilst Tobacco, Health and Miscellaneous Goods are found to be necessities. Our policy recommendations indicate that policy makers should not focus exclusively on economic variables. Rather, it is similarly important to define social policies (education, health, …) that harmoniously redistributes income, as well as to improve their efficiency in such a way that the individual becomes more productive.