We study the impact of a minimum consumption requirement on the rate ofeconomic growth and the evolution of wealth distribution. The requirementintroduces a positive dependence between the intertemporal elasticity ofsubstitution and household wealth. This dependence implies a transitionphase during which the growth rate of per-capita quantities rise towardtheir steady-state values and the distributions of wealth, consumption, andpermanent income become more unequal. We calibrate the minimum consumptionrequirement to match estimates available for a sample of Indian villagersand find that these transitional effects are quantitatively significant anddepend importantly on the economy's steady-state growth rate.
