Economic Policy Reforms 2023

Denmark

See more data for Denmark on the related dashboard.

Product and labour markets functioning

Performance gaps

• Rent regulation distorts and hampers growth in the private rental market, limiting mobility.

• Favourable tax treatment stimulates homeownership unduly. Low housing taxation reduces the overall efficiency of the tax system.

Recommendations

• Deregulate the rental market notably by easing special rent regulation for flats in buildings constructed before 1991.

• 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.

Digital transition

Performance gaps

• Despite strong digital infrastructure provision, e-government and digital skills, modest investment in intangibles and labour shortages in ICT threaten the diffusion of productivity-boosting digital technologies. Investment is hampered by high top marginal tax rates on labour and capital income.

Recommendations

• Develop VET programmes that reflect future structural changes in the economy, such as digitalisation, and offer pathways to higher education.

• Reduce top marginal tax rates on labour and capital income.

Inclusiveness, social protection, and ageing

Performance gaps

• Social protection is strong and high-quality public services support social mobility. However, large gaps in employment rates and educational outcomes between foreign-born and natives persist. School segregation of immigrant students is high by OECD standards

Recommendations

• Improve immigrant integration programmes by broadening the adoption of best practices across municipalities and extending the Integration Education Programme.

• Implement a broad integration strategy in the education system to address performance gaps.

Climate transition

Performance gaps

• Denmark has been a frontrunner in climate change mitigation policies and successfully reduced greenhouse gas emissions. However, achieving carbon neutrality as planned in a cost effective and inclusive way will require effective carbon pricing, while compensating for adverse distributional effects.

Recommendations

• Make emission pricing outside the EU Emissions Trading System more uniform by implementing a minimum price.

• Provide targeted support to those negatively affected by climate policy in a transparent manner, including via reduced taxation of renewable energy and means-tested transfers.

Overall performance