Baumol's Migrants: Productive and Unproductive Entrepreneurship and Between-MSA Migration

Abstract

William Baumol proposes that there are two types of entrepreneurship: productive or unproductive. Productive entrepreneurship, characterized by innovation and efficient resource allocation, fosters economic growth and can act as a potent magnet for migration. Conversely, unproductive entrepreneurship, which often involves rent-seeking and regulatory circumvention, deters migration and potentially provokes out-migration. To test this link from the types of entrepreneurship and migration, we use a new index of entrepreneurship (productive and unproductive) in conjunction with a dataset covering migration to and from Metropolitan Statistical Areas (MSA) from 2005 to 2019. Our analysis reveals that regions high in productive entrepreneurship experience significant net in-migration, while those dominated by unproductive entrepreneurship see the opposite effect.

Keywords: Entrepreneurship, Migration, Innovation, Productivity