Effects of demographic variables do indeed matter on demand patterns of Pacific Island households

Consumer demand systems are estimated based on household expenditure micro-data and price variabilities (tapped over quarters and regions) of a developing Pacific island country. More purposefully, ‘hierarchically ordered’ modifications of parameter variations across differing demographic profiles of the households are surveyed, estimated and compared. The analysis shows that the specification that allows all its parameters to capture the demographic variabilities does exhibit the most superior explanatory econometric properties; thus implying that demographic characteristics do interact and influence household consumption behaviour. On the basis of the identifies best specification, the study empirically stylises household behavioural patterns. Moreover on the basis of its sound theoretical underpinning and procured strong empirical evidence, the study reveals that the choice of a particular manner by which effects of demographic variables are allowed to bear on an analysis of consumption behaviour does matter. Additionally, it strongly warns against ignoring such effects in analyzing patterns of consumer demand in developing Pacific island countries.