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 language | English (US) |
|---|---|
| Pages (from-to) | 482-505 |
| Number of pages | 24 |
| Journal | Macroeconomic Dynamics |
| Volume | 3 |
| Issue number | 4 |
| DOIs | |
| State | Published - Jan 1 1999 |
Keywords
- Growth
- Inequality
- Minimum consumption
- Wealth distribution
ASJC Scopus subject areas
- Economics and Econometrics
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Chatterjee, S., & Ravikumar, B. (1999). Minimum consumption requirements: Theoretical and quantitative implications for growth and distribution. Macroeconomic Dynamics, 3(4), 482-505. https://doi.org/10.1017/s1365100599013024