The concept of the natural rate of unemployment is widely used in the analysis and discussion of macroeconomic policy. It is, however, unobservable so that estimates of the natural rate are necessarily based on a particular theory of unemployment. Hence, measures of the natural rate, whether...

The natural rate of unemployment is calculated based on D. M. Lilien's (1982) notion that an increase in the sectoral dispersion of demand results in a rise in unemployment for a given level of aggregate demand. In contrast to earlier applications, the dispersion measure is based on sectoral...