Subjective Unemployment Expectations and Precautionary Behavior in the Shadow of Peer Job Loss

Ida Maria Hartmann
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Ida Maria Hartmann: Department of Economics, University of Copenhagen

No 25-08, CEBI working paper series from University of Copenhagen. Department of Economics. The Center for Economic Behavior and Inequality (CEBI)

Abstract: examine whether individuals subjective unemployment expectations and self-insurance behavior are systematically related to unemployment experiences within their social networks. Using a combination of survey-elicited ubjective unemployment expectations and Danish administrative data, I document three main findings. First, peer job loss is strongly predictive of individuals own future unemployment risk, even after controlling for fixed effects and prior outcomes — suggesting that peer unemployment carries information about latent labor market conditions. Second, individuals subjective unemployment expectations respond to recent unemployment among peers, particularly when the individuals have little experience of their own. Third, peer job loss exposure is associated with precautionary behavior, including higher take-up of private unemployment insurance and increased transitions to lower turnover jobs.

Keywords: Expectations; Information; Unemployment; Self-Insurance (search for similar items in EconPapers)
JEL-codes: D83 J64 (search for similar items in EconPapers)
Pages: 52
Date: 2025-08-08
New Economics Papers: this item is included in nep-lab
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