Food demand in Brazil: an application of Shonkwiler & Yen Two-Step estimation method

Abstract

The objective of the analysis is to estimate a demand system including eighteen food products using data from a Brazilian Household Budget Survey carried out in 2002 and 2003 (POF 2002/2003). The functional form used was Quadratic Almost Ideal Demand System (QUAIDS). Estimation employs the Shonkwiler and Yen method to account for zero consumption. Results showed that purchase probabilities of staples foods were negatively related to family monthly income, while meat, milk and other products showed a positive relation. Regional, educational and urbanization variables were also important in the first stage estimation. While some of the goods had negative income coefficients, none were inferior and six of eighteen were luxuries based on second stage estimates.