This Survey is published on the responsibility of the Economic and Development Review Committee (EDRC) of the OECD, which is charged with the examination of the economic situation of member countries.The economic situation and policies of Denmark were reviewed by the Committee on 27 November 2013. The draft report was then revised in the light of the discussions and given final approval as the agreed report of the whole Committee on 19 December 2013.The Secretariat’s draft report was prepared for the Committee by Stéphanie Jamet and Muge Adalet McGowan under the supervision of Vincent Koen. Research assistance was provided by Lutécia Daniel.

Denmark scores highly on many dimensions of well-being. Nevertheless, weak productivity growth over the past two decades has contributed to a widening of the income gap vis-à-vis leading OECD economies. Renewing with stronger productivity growth over the longer run is an overarching challenge for Denmark and calls for keeping up structural reform efforts.

On many counts, Denmark scores well in international comparisons. It is repeatedly ranked as the happiest nation in the world according to the Gallup World Poll (Helliwell et al., 2013) and enjoys a high level of well-being along many dimensions (). Labour market outcomes are better than average, and are accompanied by an outstanding work-life balance, low inequality and a good level of education and skills. Environmental quality is high, as are civic engagement and trust in institutions (OECD, 2013a). Public finances are also in relatively good shape, with a small debt-to-GDP ratio and budget deficit despite the shocks endured in recent years. Inflation has been low and stable. These outcomes are the result of sound policies and institutions.

Danish productivity has grown only weakly over the past two decades, both historically and in relation to other countries, despite sound policies and institutions. At the same time, the country has lost export market shares. Denmark needs to continue its efforts to reap the benefits of globalisation, which would contribute to invigorating productivity growth. Fostering competition by removing regulatory barriers and improving public procurement would help. In addition, innovation policy needs to become more efficient and more in line with the growing importance of the service sector and knowledge-based capital. Small and medium-sized enterprises could be better integrated into global markets by improving their access to finance and developing the entrepreneurship culture.

Surveys suggest that Denmark ranks close to or slightly above the OECD average in terms of student and adult skills, even though Denmark spends more than many OECD countries on education, labour market policies and adult learning. Sluggish productivity growth over the past two decades raises the question of how to develop better skills and use them more efficiently to achieve stronger and more inclusive growth. Improving the performance of compulsory and tertiary education would help all students acquire the right skills. Ensuring adults upgrade their skills is another key challenge, which involves strengthening the adult learning system. Reforms of taxation and of the wage setting system in the public sector would promote a better allocation of skills economy-wide. Finally, to activate skills more broadly, reforms to raise labour market participation should continue and the efficiency of active labour market policies will have to be increased further.