Fig. 2
Labor-consumption trade-off. Note: The two panels show labor supply choices in a stylized model under two conditions, for three types of individuals. Left panel: Seed capital does not compensate benefit losses. Right panel: Seed capital overcompensates benefit losses. Notation: s: amount of seed capital, b: loss of benefits if an individual extends his/her earnings beyond a certain cash-cliff threshold. Wages are denoted w. The budget constraint is C = wL + b if work hours L are below the cash-cliff threshold (L ≤ τ) and C = wL + s if individuals expand their work hours beyond the cash-cliff threshold and claim seed capital