Unsustainable inequality, is there a turning point? Empirical evidence from a panel of Latin American countries

The objective of this paper is a cross country study (limited to Latin America) of the relationship between inequality and growth performance. A threshold estimation technique is applied to a panel of 13 Latin American countries over the 1970-2011 time period, and it reveals the existence of a threshold level for the most popular index of income inequality (Gini's): below it, neither past values of the index nor per capita GDP appear to be able to explain current variations in inequality, while beyond such a level the former may account for the decrease in current income inequality. We are brought to conclude that there seems to exist a turning point for income inequality, though per capita GDP would have no effects on its dynamics (as is maintained in most literature supportive of the Kuznets’ curve). Thus, we aim to contribute further evidence on the dubious existence of such a Kuznets Curve (and it seemingly succeeds). In this, it links up with recent critical literature on the theme of the shortcomings of increasing inequality in growth performance. This paper is a follow up to two previous papers, reexamining the relationship between income concentration and growth performance, along the lines proposed by the analysis of Kuznets. One such a paper (coauthored) is about Mexico; the other one compares China’s with Brazil’s models of growth, both focusing on the different policy strategies (hence, functional relationships) with their implications for the evolution of inequality vis-a-vis  growth performance. Policy recommendations or suggestions, as to the sustainability of certain (recent) growth paths, are obvious.