The Opportunity Costs of Entrepreneurs in International Trade

Kehoe, Timothy J.; Pujolas, Pau S.; Ruhl, Kim J.

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The Opportunity Costs of Entrepreneurs in International Trade

Abstract: We show that a trade model with an exogenous set of heterogeneous firms with fixed operating costs has the same aggregate outcomes as a span-of-control model. Fixed costs in the heterogeneous-firm model are entrepreneurs' forgone wage in the span-of-control model.

Keywords: Firm heterogeneity; International trade; Span-of-control model; Income distribution;

JEL Classification: D31; D43; F12;