Income inequality is expected to result in a less inclusive economy, where it imposes constraints on the accumulation of human capital and the effective utilization of both physical and human capital. In this research, I use panel data from Sweden, which includes 290 municipalities from 2003 to 2022, to analyze the relationship between income inequality and the average income growth rate. Additionally, an interaction effect of income inequality and education on average income growth is tested, which, to my knowledge, has not been tested in previous studies. The method used is a two-way fixed effects model that allows for controlling for time and municipality-specific heterogeneity. The Gini index, p90/75, p50/10, and shares of total income held by top income earners are used as measures of income inequality. The Gini index and the share of total income held by the top 1% of income earners show a positive correlation with the average income growth rate, in line with findings in Cialani (2013). Income inequality in the lower tail of the income distribution (p50/10) and top 25% shows a negative correlation with the average income growth rate. The tested interaction effect shows an insignificant effect on the average income growth rate. The interactions between income inequality measures such as the Gini index, p90/75, p50/10, and the share of the population with post-upper secondary education are used.