Figure 1
Illustration of optimal occupation choices and returns in the first period (upper right corner) and in the second period (upper left corner). Note: In the upper left coordinate, the black solid line represents the second period return, conditional on being an entrepreneur in the first period. The gray solid line presents the second period return, conditional on being a laborer in the first period and H 2 ≥ H 1. The dashed gray line represents the second period return, conditional on being a laborer in the first period and H 2 < H 1. Formaly, \( {\mathrm{Y}}_{\mathrm{E}}^2{\left.\right|}_{{\mathrm{E}}_1=1}={\uplambda}_2\left(\frac{{\mathrm{H}}_1+{\mathrm{H}}_2}{2}\right) \) if \( {\uplambda}_2\ge\ 1+\frac{H_2}{H_1+{H}_2} \) and λ1 > 2. \( {\mathrm{Y}}_{\mathrm{E}}^2{\left.\right|}_{{\mathrm{L}}_1=1}={\uplambda}_2\left(\frac{{\mathrm{H}}_1+{\mathrm{H}}_2}{2}\right) \) if λ2 ≥ 2, λ1 ≤ 2 and \( {H}_2\ge {H}_1.\kern0.75em {\mathrm{Y}}_{\mathrm{E}}^2{\left.\right|}_{{\mathrm{L}}_1=1}={\uplambda}_2{\mathrm{H}}_2 \) if \( {\uplambda}_2\ge\ 1+\frac{H_1}{H_2}, \) λ1 ≤ 2 and H 2 < H 1.