Enhancing Expenditure Control with a Decentralised Public Sector in Denmark

This paper analyses of some the key aspects of public expenditure policy in Denmark. The public expenditure to GDP ratio has abated markedly since the mid-1990s, reflecting both cyclical gains and the return on structural reforms. Nevertheless, the underlying upward pressure on government spending, notably from the demand for personal services, is generally perceived to be significant and expected to persist. The origins of such pressure, as well as means of containing it in the future, are discussed. With public consumption being very high by international standards, the paper advocates greater competition in the provision of services to individuals and more reliance on market signals such as client choice and user charges to enhance the efficiency of resource allocation. A particular feature of the Danish public sector is the fact that counties and municipalities have been assigned a wider range of responsibilities than in any other OECD country as well as extensive taxing ...