Revisiting Inequality and Growth: Evidence for Developing Countries

This article studies the relationship between economic growth and income inequality using panel data for a sample of Latin American countries in the period 1960-2000. Different estimation techniques and specifications are tested. Results indicate that the level of inequality has had a different effect on growth in the region, depending on the level of gross domestic product per capita. Even within a sample of developing countries, the effect of inequality on growth is negative for poorer countries, whereas for richer ones higher inequality may favour economic growth. Overall, our results are not robust to different specification techniques, and coefficients are in some cases only weakly significant, underlying the difficulties in finding a strong and robust relationship between income inequality and economic growth.