Whether inequality affects growth is an interesting question for at least two reasons. First, today inequality is a hot topic, and many claim it is bad for our economy. Is there any truth to these claims? Should we actively try to reduce inequality?
Second, if wealth distribution matters for growth, then differences in development among countries can potentially be (partially) explained by their initial, historical wealth distributions. For instance, if inequality is good for growth, then it could be that countries with high inequality at the dawn of the Industrial Revolution (i.e. when growth kicked off) have done better than those with low inequality.