This paper studies a three sector growth model with households differentiated in their factor endowments, resulting in asset and income inequality among the households. Production occurs in agricultural, formal manufacturing, and informal manufacturing sectors. In particular, household preferences display Engel effects in two of the goods: agricultural and informally produced goods. Income elasticity of demand for formally produced goods, on the other hand, is equal to one for all households. As the economy transitions into the long-run equilibrium with the process of capital accumulation, the importance of agricultural and informal sectors diminish, and that of the formal sector increases, given any degree of inequality. However, with higher degrees of inequality, that is, if capital and land are concentrated in the hands of a few and not distributed more evenly among all households, the results from model simulations indicated that in the long run, the economy ends up with a slightly larger informal sector and a smaller formal sector.