Subjective unemployment expectations and precautionary behavior in the shadow of peer job loss

I 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 subjective 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.