Measuring Structural Unemployment: Nawru Estimates in the Nordic Countries

Abstract

The non-accelerating wage rate of unemployment (NAWRU indicator), used by the OECD as a measure of structural unemployment, has risen for the four Nordic countries Denmark, Finland, Norway and Sweden. In this paper we present stable empirical wage equations for the same countries over the period 1964-1994, in sharp contrast to the increased NAWRU estimates. The instability of the NAWRU estimates is an artefact of a misspecified underlying wage equation, and not due to instability in wage setting itself.

JEL Classification: E24, E31, E64, J51