INCOME INEQUALITY AND ECONOMIC GROWTH: NEW EVIDENCE FROM LATIN AMERICA

DELBIANCO, FERNANDO ANDRÉS; DABÚS, CARLOS; CARABALLO POU, MARÍA ANGELES

Cuadernos de Economía

Universidad Nacional de Colombia

Lugar: Bogotá; Año: 2014 vol. 33 p. 381 - 398

0121-4772

This paper explores the relationship between the inequality of income distribution and the economic growth of 20 Latin American and Caribbean countries during the 1980-2010 period. The study shows that the features of this relationship depend on the income level. In general, inequality is harmful to economic growth. However, when it comes to the upper tail of the richer countries? income distribution, higher inequality encourages economic growth and the relation becomes positive. Thus, contrary to the economic policy recommendations for the richer countries, our evidence suggests that progressive redistributive policies in favor of poorer layers of population promote economic growth in lower income economies.