Minimum consumption requirements: Theoretical and quantitative implications for growth and distribution

Satyajit Chatterjee, B. Ravikumar

Research output: Contribution to journalArticle

25 Scopus citations

Abstract

We study the impact of a minimum consumption requirement on the rate of economic growth and the evolution of wealth distribution. The requirement introduces a positive dependence between the intertemporal elasticity of substitution and household wealth. This dependence implies a transition phase during which the growth rate of per-capita quantities rise toward their steady-state values and the distributions of wealth, consumption, and permanent income become more unequal. We calibrate the minimum consumption requirement to match estimates available for a sample of Indian villagers and find that these transitional effects are quantitatively significant and depend importantly on the economy's steady-state growth rate.

Original languageEnglish (US)
Pages (from-to)482-505
Number of pages24
JournalMacroeconomic Dynamics
Volume3
Issue number4
DOIs
StatePublished - Jan 1 1999

Keywords

  • Growth
  • Inequality
  • Minimum consumption
  • Wealth distribution

ASJC Scopus subject areas

  • Economics and Econometrics

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