This paper examines the relationship between inequality and growth in the Italian regions in the
period 1990-2004. Our results support the conjecture, formulated by the most recent economic theory,
that greater inequality in the distribution of personal incomes reduces real growth. Furthermore, a
detailed examination of the possible influence mechanisms of inequality on growth shows that both
the credit rationing and the social instability channel are relevant in explaining the empirical evidence
considered. Our analysis ultimately suggests that a decrease in income inequality in the Southern
regions, achieved through adequate redistributive policies in the area, might contribute to reducing
the lag in the economic development of the Mezzogiorno.