Economic Development and Inequality in Thirteen Economies of Latin America and the Caribbean

This paper evaluates the relationship between inequality and economic growth for thirteen Latin American economies in a time interval from 1998 to 2020. Using a panel data econometric model, we study the impact of the Gini Index (inequality) on the Gross Domestic Product (GDP) growth rate of the economies under study. Three estimates were made, the first consisted of a general panel data model, the second estimate was made considering fixed effects by region and time, and finally, the third model considered an estimate with random effects. The results suggest that there is an inverse and significant relationship between the per capita GDP growth rates of Latin American economies and their initial per capita GDP levels, the existence of conditional beta convergence in the sample is also verified, and another result indicates that there is a negative and statistically significant relationship between the growth rate and the Gini index. The empirical reality shows that the objective of achieving high growth rates as an economic policy goal is not sufficient to remedy the problem of inequality; rather, these two phenomena are dynamic and interrelated.