Estimating a Life Cycle Model with Unemployment and Human Capital Depreciation

I estimate a life cycle model of consumption choice with unemployment risk. Employed individuals face the risk of losing their job. Unemployed agents receive job random offers of different quality, which they can accept or reject. Following the loss of a job and during unemployment, an agent’s productivity declines. Using micro data, I estimate the structural model for Germany, the UK, and the US following the method of simulated moments approach of Duffie and Singleton. The estimated model is used to perform policy simulations that highlight the relationship between the unemployment insurance scheme and the unemployment rates of different age groups.