Measured by per capita incomes, Danish living standards have been in the top handful of OECD countries for several decades. Moreover, Denmark has paid great attention to its social goals such as income equality and environmental sustainability. Twenty years of comprehensive reforms have put the economy on a robust footing without any short-term macroeconomic imbalances. Hence, policymakers – and this Survey – have been able to focus mainly on the long-term issues rather than day-to-day cyclical pressures. Denmark’s performance...

This chapter discusses the long-term challenges facing the Danish economy. It reviews recent performance regarding per-capita incomes, productivity growth and income inequality. The fundamental challenge is to maintain growth in living standards while preserving the welfare system. The chapter compares the government’s and the Welfare Commission’s estimates of fiscal sustainability in the face of an ageing population. The first way to meet this challenge is to increase...

This chapter discusses the outlook for public finances given the pressures that are due to come from an ageing population. It compares the expenditure projections made by the government and the Welfare Commission (Velfærdskommissionen), and their varying assumptions on longevity and age-related health-care costs. Despite differences, the studies suggest that the current welfare system is not sustainable. Also discussed are the appropriateness of the government’s mediumterm fiscal framework (the 2010 Plan) and the need for extra efforts to boost labour...

This chapter discusses how to increase labour supply, in terms of both hours of work and employment. The impact of high income taxes on working hours is discussed, and it is recommended that the top marginal tax rate be cut (as part of a revenueneutral package). The parental leave scheme is one of the world’s most generous, and also contributes to low average working hours. Sickness absences can also...

This chapter discusses ways of strengthening the competitive environment in order to help boost productivity performance in various sectors of the economy. It looks at a number of indicators of the strength of competition – including price levels, industrial concentration and product market regulation – and it discusses the appropriateness of the competition legislation framework. The chapter then focuses on the large public sector, which has been slow to open up to competition...

This chapter looks at ways to increase productivity growth and build a more innovative, knowledge-based economy. It focuses on improving the Danish school system, which is expensive but delivers results that are just average. It also discusses policies to make universities more flexible and labour-market oriented, how to encourage greater commercialisation of R&D and how to get better value for...