Subjective unemployment expectations and (self-)insurance

Abstract

We study subjective unemployment expectations and their influence on economic behavior. We utilize a longitudinal data set combining survey elicited subjective unemployment expectations with administrative data on income, savings, and unemployment insurance. Our findings indicate that subjective expectations hold valuable predictive information about subsequent unemployment experiences. We find that individuals tend to overestimate their risk of unemployment. Moreover, higher unemployment expectations lead to a greater likelihood of enrolling in unemployment insurance and accumulation of liquid savings.