In October 1999 the unemployment rate of people with severe disabilities in Germany was more than double that of the non-disabled population. To improve this situation, the People with Severe Disabilities Act was reformed to increase incentives for the severely disabled to enter the work force...

We analyse benefit-entitlement effects and the likely impact of the recent reform of the unemployment compensation system on the duration of unemployment in Germany on the basis of a flexible discrete-time hazard rate model estimated on pre-reform data from the German Socioeconomic Panel (SOEP)....