"Economic growth and inequality in Latin American countries: Some theoretical and empirical considerations", (together with Marta Bengoa), VII Jornadas de Economía Internacional, Málaga, June 20-22 2001

The present paper develops an endogenous theoretical model of economic growth addressing the relationship between the rate of growth of real GDP and inequality.   The model predicts a quadratic relationship between inequality and the growth rate of the economy. The intuition is that social expenses intended to bring about a greater level of equality will, at a certain point, exert a crowding out effect on private activity, thus jeopardizing growth.

Next,  we test  the theoretical model employing a panel data encompassed by a representative sample of Latin-American economies from 1975 to 1995. Our results support the existence of a quadratic relationship between the income inequality (proxied by the Gini index) and the rate of growth of the economies. Moreover, the empirical evidence underlies the necessity of a important investment in infrastructure in less developed countries, absolutely essential to obtain the "social capacibility" (Abramovitz, 1986) in order to foster the growth rate of income.