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2019 OECD Economic Surveys: Denmark 2019

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Living standards and wellbeing are high in Denmark. Economic conditions have improved in recent years and the steady expansion is projected to continue. A prolonged series of pension and benefit reforms has delivered sound public finances and strengthened potential growth, among others by indexation of statutory retirement ages to life expectancy. Improving public sector efficiency remains a challenge and would benefit from further digitalisation and reform of collective bargaining. Danish firms are close to the technological frontier thanks to digitalisation and favourable business framework conditions. Nonetheless, productivity growth has been disappointing in the recent past with a particular weakness in less knowledge-intensive service industries. Boosting productivity growth is essential to ensure that living standards and wellbeing remain high. This requires further improving business framework conditions, notably competition pressures. Policy needs to embrace innovative technologies by leaning against attempts to discourage or exclude them and by tackling unintended or outmoded obstacles in legislation and regulation. Reducing high marginal taxes, broadening innovation activity and attracting more high-skilled foreign workers are also priorities.



SPECIAL FEATURES: PRODUCTIVITY; BUSINESS FRAMEWORK CONDITIONS

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Adapting business framework conditions to deal with disruptive technologies

Danish firms are close to the technological frontier compared to other OECD countries, making the introduction of new – potentially disruptive – technologies key to boost productivity growth. Despite a high level of digitalisation and good framework conditions, aggregate productivity growth in Denmark has been only average compared to other advanced OECD countries and lags behind in less knowledge-intensive service industries. Policy needs to embrace innovative technologies by leaning against attempts to discourage or exclude them and by tackling unintended or outmoded obstacles in legislation and regulation. Analysis based on Danish firm-level data suggests that digital adoption through investment in ICT capital increases firm productivity and contributes to business dynamics and firm growth. Improving economic incentives for such investment as well as facilitating adoption of new business models require a shift of taxation away from capital and labour income. Ensuring supply of the right skills and maintaining effective upskilling will help workers cope with disruptive changes and ensure that economic growth benefits all.

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