Abstract

This paper attempts to answer the questions: what is the effect of income inequality on economic growth? Is the inequality-growth relationship different for the Chilean regions than for the Latin American countries? An econometric analysis is proposed, estimating growth based on inequality, initial income, and other control variables. Four different inequality measures show that in Latin American countries the level of development mitigates the negative impact of inequality on growth. On the other hand, the results for the Chilean regions show an inverted U-shaped relationship between inequality and growth. However, the regional effect is positive on average.