Does inequality harm income mobility and growth?

Latin America is the most unequal region of the world in terms of income or expenditure, as well as regarding other aspects of economic or social exclusion. Given the persistently high levels of poverty incidence in Paraguay, understanding the determinants of growth at the household level in Paraguayan economy remains an important but under-researched field in economics. This appears to be particularly true for the question whether inequality has a positive or negative effect on economic growth, a question that is both fundamental in (development) economics and highly relevant for poverty reduction policies. Although the effect of inequality on growth has important implications for poverty (Bourguignon, 2004; Ravallion, 1997), empirical evidence on this link is virtually inexistent for Paraguay.