The paper gives a broad discussion of structural unemployment seen from a Danish perspective. In the Danish Ministry of Finance the level of structural unemployment is estimated using two indicators - NAIRU and ITRU. The two indicators basically reflect variations in unemployment and inflation as measured by the GDP-deflator and are computed using historical simulations with the national macro-econometric model ADAM.

The uncertainty related to estimates of the level of structural unemployment calls for a great deal of caution when using such estimates in the framing of economic policy. Estimates of structural unemployment can nevertheless be useful when making forecasts of inflation and assessing the appropriate fiscal stance and - not least - when assessing the effectiveness of labour market policies and the possible need for changes. For the purpose of policy-making it is useful to make clear to what extent structural unemployment can be ascribed to “employability” problems of ...