The Opportunity Costs of Entrepreneurs in International Trade

Timothy J. Kehoe, Consultant

Pau S. Pujolàs

Kim J. Ruhl

July 2016 | Federal Reserve Bank of Minneapolis Staff Report 533

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.

Published in: Economics Letters, 146 (2016): 1-3
DOI: 10.1016/j.econlet.2016.07.012