This paper examines peer effects in welfare use among refugees. We exploit a Swedish refugee placement policy, which generated exogenous variation in peer group composition. Our analysis distinguishes between the quantity of contacts--the number of individuals of the same ethnicity--and the quality of contacts--welfare use among members of the ethnic group. Long-term welfare dependence increases if the individual is placed in a welfare dependent community. The number of contacts is either irrelevant or negatively related to welfare receipt; not controlling for residential self-selection yields the opposite conclusion. The results are very similar across household types and in different parts of the predicted earnings distribution. (Contains 7 tables, 1 figure and 29 footnotes.)