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Denmark GDP per capita is among the highest in the OECD with high levels of labour productivity. Hours worked are slowly declining and remain below the OECD average. Income inequality is among the lowest in OECD countries, but it is gradually increasing. Greenhouse gas emissions are just below the OECD average and Denmark is on track to meet its reduction targets. A property tax reform in 2017 lifted a longstanding nominal tax freeze, which will help to stabilise the housing market. Nevertheless, property tax rates remain too low relative to other assets and shifting the tax structure towards immovable property remains a priority. Competition has been strengthened by liberalisation of the taxi market regulation. Adult education, training and upskilling are being made more flexible and accessible with the involvement of social partners. Removing distortions in the housing market via tax reform and rental deregulation would improve geographical mobility of the labour force. Reducing the complexity of the competition framework and raising the efficiency and alignment of the education system with future labour market demand would boost productivity. Growth performance, inequality and environment indicators: Denmark A. Growth Average annual growth rates (%) GDP per capita Labour utilisation of which: Labour force participation rate Employment rate1 Employment coefficient2 Labour productivity of which: Capital deepening Total factor productivity Dependency ratio
2002-08 1.2 0.5 0.1 0.2 0.2 0.6 0.4 0.3 0.1
2012-18 1.2 0.6 0.0 0.5 0.1 0.6 0.0 0.6 0.0
Level
Annual variation (percentage points)
2015 26.3 (31.7)*
2013-15 0.5 (0)*
9.6 (7.6)*
-0.1 (0)*
2016 10 (10.9)* 0.2 (0.3)* 0.1
Average of levels 2010-16 10.1 (11.3)* 0.2 (0.3)* 0.1
C. A small gap in GDP per capita has emerged Gap to the upper half of OECD countries5 Per cent 25 GDP per capita
GDP per hour worked 20
15
B. Inequality and environment
Gini coefficient3 Share of national disposable income held by the poorest 20%
GHG emissions per capita4 (tonnes of CO2 equivalent) GHG emissions per unit of GDP4 (kg of CO2 equivalent per USD) Share in global GHG emissions4 (%) * OECD simple average (weighted average for emissions data)
10
5
0
-5
Source: Panel A: OECD, Economic Outlook Database; Panel B: OECD, Income Distribution and National Accounts Databases; United Nations Framework Convention on Climate Change (UNFCCC) Database and International Energy Agency (IEA), Energy Database; Panel C: OECD, National Accounts and Productivity Databases StatLink 2 https://doi.org/10.1787/888933954819
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Policy indicators: Denmark A. The gap in PISA performance between immigrants and natives is high
B. Property tax is comparatively low Percentage of total tax revenue, 2017
Differences in PISA mean scores in mathematics and science performance, 2015 90 80 70
6
Natives versus first-generation immigrants Natives versus second-generation immigrants
5
60
4
50 40
3
30 20
2
10 0
1
-10 -20
DENMARK
Advanced economies
3 best performing countries
DENMARK
Advanced economies
Other Nordic countries
0
Source: Panel A: OECD, PISA 2015 Results (Volume I): Excellence and Equity in Education, Annex B1.7 Annex B1.7 Results (tables): Immigrant background, student performance and students' attitudes towards science; Panel B: OECD, Revenue Statistics Database. StatLink 2 https://doi.org/10.1787/888933955693
Beyond GDP per capita: Denmark A. Inequality has increased but remains low Gini coefficient, 2016 or last available year¹ DENMARK, 26.3 SVK, 24.1
ZAF, 63.0
Advanced economies median, 29.7
Emerging economies median, 46.2
B. Exposure to fine particulate matter is comparable to that of advanced economies Percentage of population exposed to PM2.5, 20172
% DENMARK
Advanced economies
< 10 μg/m³ 10-35 μg/m³
Emerging economies
> 35 μg/m³
World 0
10
20
30
40
50
60
70
80
90
100
Source: Panel A: OECD, Income Distribution Database, World Bank, World Development Indicators Database and China National Bureau of Statistics; Panel B: OECD, Environment Database. Note: For the explanation of the sets of indicators above, please go to the metadata annex at the end of this chapter. StatLink 2 https://doi.org/10.1787/888933956567
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Denmark: Going for Growth 2019 priorities Strengthen integration of refugees and migrants. Boosting labour market participation and employability of foreign-born individuals and their children will help to foster inclusive growth, reduce social spending and expand the tax base.
Actions taken: In 2018 a plan to combat the prevalence of deprived neighbourhoods was adopted. Municipalities are not allowed to move people receiving social assistance into these areas, children are required to attend day care from the age of one and resources are allocated to modernise social housing.
Recommendations: Mitigate barriers to employment posed by high entry wages by improving the integration training programme and further involvement of social partners and civic society. Take steps to better co-ordinate language training, education, subsidised work and recognition of foreign competencies within municipalities and spread best practices across municipalities. For second generation immigrants, implement a broad integration strategy in the education system.
Shift the tax structure towards immovable capital. Moving taxation away from personal income to housing would bolster work incentives and reduce tax distortions across asset types.
Actions taken: A property tax reform was approved in 2017 and will become fully effective in 2021. It includes a new system for housing valuation and replaces a nominal freeze of property taxes with proportional taxation, maintaining a progressive element for the most valuable homes.
Recommendations: Shift the tax burden further away from labour and corporate incomes by raising the property and land tax rates and by reducing tax deductibility of interest expenses.
Reduce distortions in the housing market. Housing subsidies and rent regulation distort and hamper growth of the private rental market, reduce labour mobility and puts upward price pressure on house prices in the largest cities.
Actions taken: No action taken.
Recommendations: Ease rent regulation and reduce housing subsidies to support a better utilisation of the housing stock and a larger supply of rental flats. Improve targeting of housing subsidies by relying more on in-kind support for students and social housing in general.
Strengthen competition. Enforcement of competition, particular in some service markets, is complicated by the complexity of the competition framework, hampering productivity growth.
Actions taken: Taxi market regulation has been liberalised from January 2018 and restrictions on licenses will be fully lifted by 2020. A strategy to enhance public procurement, including quantitative targets, better access for smaller firms and reduced transaction costs for firms was announced in May 2018.
Recommendations: Streamline the institutional setup and procedural system for the competition authority to allow for effective enforcement. Simplify the complex and lengthy court procedures, for instance by allowing the competition authority to issue administrative fines within the constitutional limits. Develop clearer standards for exemptions from the Competition Act and involve the competition authority in their determination. Implement the public procurement strategy.
128 Improve the efficiency of the education system. Enhancing quality and aligning education better with future labour market demands would improve human capital accumulation and boost productivity growth.
Actions taken: A tripartite agreement between the government and social partners in 2017 includes measures to improve quality of adult education, training and upskilling and make it more flexible and accessible, including through a digital one-stop entry platform.
Recommendations: Improve the quality and relevance of vocational education to boost enrolment. Develop VET programmes that reflect future structural changes in the economy and offer pathways to higher education. Evaluate the supply of tertiary education to simplify and reduce the large number of entries and provide clear information on employment opportunities for prospective students. Reduce student grants for tertiary education and rely more on student loans. Link repayment conditions to subsequent income and labour market status.