Example: Huggett, Ventura & Yaron (2006)

1

Example based on Huggett, Ventura & Yaron (2006)

Does two things:
i) based on PSID data, estimate life-cycle profiles
ii) calibrate life-cycle model with human capital to reproduce the life-cycle profiles

This is the first example demonstrating the “CalibrateLifeCycleModel_PType()” command. The CalibrateLifeCycleModel commands work much the same way as the GMM estimation commands.

[The PSID data work requires you to download some PSID data which is then imported into Matlab and the data work is done in Matlab, the instructions for how to download so are near the top of the script.]

Irrelevant comment: Codes are actually doing something an order of magnitude harder than HVY2006. If you look closely, you will notice HVY2006 calibrate only parameters that matter for agent distribution and moments (but not for the value/policy fns). So they would have solved value/policy fn once, then done the calibration only repeating agent distribution and moments. VFI Toolkit is repeating the value/policy fn as part of calibration, and since this is by far the hardest of the steps the exercise the codes do here is actually much more computationally demanding than what you would do if you wrote custom code for HVY2006. But it does still nicely demonstrate how you can use the calibration commands and their power.

2 Likes
2

Nice! Now we are waiting for their 2011 paper, which is really a great paper :slight_smile:

4

Now we are waiting for their 2011 paper

There is a half-finished copy on my harddrive. I want to implement a “Calibrate OLG model” command as part of finishing it up :smiley:

1 Like
5

Great! I think even only the solution of the model would be interesting, since it is an example of a model with assets and human capital.