This thesis aims to point to welfare consequences of income inequality, using privateconsumption as a welfare indicator. A motivation for this paper is provided by the stylized fact that income inequality is increasing and countermeasures have to be taken to prevent or reduce negative economic consequences. The study of theories and empirical evidence on the macroeconomic effects of income inequality shows that the effects can be divided into three time spans. In the short run, the saving rate can be influenced in different ways; in the medium term, work incentives and status seeking play an important role; and in the long term, human capital is the prime variable of interest. The focus of this thesis is on the long term effect of income inequality: educational decisions are negatively affected, which leads to less investment in human capital. In order to examine the consequences of this described effect through private consumption, the impact of an exogenous change in income inequality on human capital accumulation is demonstrated. The theoretical framework for this analysis is an endogenous growth model based on the approach of Aloi and Tournemaine (2013). The output of the model serves three important insights. First, the prime channel through which income inequality operates is the reduced human capital accumulation. Second, income inequality harms welfare through its negative impact on private consumption. Third, negative consequences affect the whole society but most poor and unskilled people. Thus, equality and therefore re-distribution is desirable and the promotion of education and training appears to be a fundamental policy to counteract the negative consequences of income inequality.