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2008 OECD Economic Surveys: Denmark 2008

image of OECD Economic Surveys: Denmark 2008

OECD's periodic survey of the Danish economy.  After examining some of the key challenges faced by Denmark, the survey looks in more detail at the fiscal strategy; promoting employment and inclusiveness; tax reform, hours worked and growth; health care; and pension savings and capital taxation.

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Assessment and recommendations

The average Dane enjoys relatively high standards of living: GDP per capita is higher than in most other European countries, even though the gap vis-à-vis the United States remains at 15-20% where it has been for over three decades. A deep commitment to open trade and structural reforms in the markets for goods and services, combined with a cohesive approach to actively helping job seekers gain or regain employment, have contributed to a competitive business environment, low structural unemployment and sound public finances. Building on a consensus to sustain these good outcomes, a set of forward-looking reform agreements has been reached in recent years. The welfare agreement of 2006 – which was supported by an overwhelming majority in Parliament – will link retirement age to longevity. The globalisation strategy of 2006 implies a boost to R&D and higher education and, following tri-party negotiations, unions and employers are now incorporating the financing of life-long learning into the collective wage agreements. Moreover, a new local government structure was established in 2007 which, together with the recent quality reform and the action plan to reduce bureaucracy, will facilitate efforts to make public services more professional and efficient. By focusing on long-term issues the Danish economy will face, these reforms will allow for gradual adjustments rather than abrupt corrections. This approach and reform momentum should be continued as challenges remain in a number of policy areas. Employment rates are high, particularly for women, but average hours worked is low. Productivity growth halved in the late 1990s partly due to reallocation of resources across sectors and wider inclusion of marginal groups in the labour market. Progress in living standards has slowed, even when considering the parallel terms-of-trade gains.

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