The Past Speaks

I’m promoting a new paper by Zoi Pittaki that applies Baumol (1990s) distinction between types of entrepreneurship (productive, unproductive, destructive) to recent Greek history. The paper has appeared in the journal Business History.
“Extending William Baumol’s theory on entrepreneurship and institutions: lessons from post-Second World War Greece”

This article examines William Baumol’s theory about the interaction between taxation and entrepreneurship and proposes an extension to it. The analysis shows that the traditional form of Baumol’s model, focusing mainly on the level of taxes, cannot be used in order to explain what happened in the Greek case. Utilising historical evidence from the mid 1950s to the late 1980s, this article confirms that problematic tax rules create difficulties for entrepreneurship and can lead to unproductive forms of it, as Baumol suggests. However, the focus here is on aspects of the system of taxation that Baumol’s model, examining solely tax rates and levels of taxation, neglected. It is shown that, as far as Greek entrepreneurship is concerned, the adverse effects of the system of taxation came not from the level of taxes, but mostly from a series of issues that increased its perceived unfairness and illegitimacy. Some of such issues were the complexity and frequent change of legislation, the insufficient organisation of the tax bureaus as well as the lack of adequate training and arbitrariness of the members of tax services. The evidence presented here suggests that Baumol’s model can be enriched by taking into consideration these aspects of taxation too.

I really like how the author used her historical research to address a gap in Baumol’s model. In my view, the paper makes a theoretical contribution that should be useful to both entrepreneurship researchers and to citizens interested in designing institutions that promote the right type of entrepreneurship.