Baumol's [Baumol, W.J., 1990. Entrepreneurship: productive, unproductive and destructive. Journal of Political Economy 98 (5), 893–921] theory of productive and unproductive entrepreneurship is a significant recent contribution to the economics of entrepreneurship literature. He hypothesizes that entrepreneurial individuals channel their effort in different directions depending on the quality of prevailing economic, political, and legal institutions. This institutional structure determines the relative reward to investing entrepreneurial energies into productive market activities versus unproductive political and legal activities (e.g., lobbying and lawsuits). Good institutions channel effort into productive entrepreneurship, sustaining higher rates of economic growth. I test and confirm Baumol's theory, and discuss its significance to the literature, economic prosperity, and policy reform.

This paper examines how closely the minimum wage has been set to the most popularly stated goals of minimun‐wage policy. I first estimate these goals: the minimum‐wage rate at which the relevant labor demand is unitary elastic‐maximizing the total earnings of minimum‐wage workers (about $5.35)‐and the level that would lift a typical minimum‐wage worker's family out of poverty (about $5.17). I can reject that the actual minimum‐wage policy has been driven by desire to achieve these goals and find that a simple interest group model best explains the historical path of the minimum‐wage rate.