In 2005, the unemployment compensation for long-term unemployed was reduced in Germany. We examine how this reform … affected the transition probability to employment. Additionally, we inspect how this effect varies over unemployment duration … raised the transition probability of short-term unemployed. The effect is even higher, the longer the unemployment duration …

(1983-2009). We show that, until the early 2000s, close to 60% of changes in the unemployment rate are due to changes in the …