2014 Index of Economic Freedom

Denmark

overall score76.1
world rank10
Rule of Law

Property Rights90.0

Freedom From Corruption93.7

Limited Government

Government Spending0.5

Fiscal Freedom39.3

Regulatory Efficiency

Business Freedom98.1

Labor Freedom91.2

Monetary Freedom80.0

Open Markets

Trade Freedom87.8

Investment Freedom90.0

Financial Freedom90.0

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Quick Facts
  • Population:
    • 5.6 million
  • GDP (PPP):
    • $210.1 billion
    • -0.6% growth
    • -0.9% 5-year compound annual growth
    • $37,657 per capita
  • Unemployment:
    • 7.6%
  • Inflation (CPI):
    • 2.4%
  • FDI Inflow:
    • $2.9 billion
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Denmark’s economic freedom score is 76.1, making its economy the 10th freest in the 2014 Index. Its overall score is the same as last year, with improvements in investment freedom and trade freedom counterbalanced by declines in the management of public spending and fiscal freedom. Trailing Switzerland and Ireland, Denmark is ranked 3rd out of 43 countries in the Europe region.

Over the 20-year history of the Index, Denmark’s economic freedom score has advanced by nearly 9 points, a top 10 improvement among developed economies. Leading the way have been notable score improvements of 20 points in investment freedom and financial freedom. Overall, Denmark’s economic freedom score has remained the same or increased in all but two areas: labor freedom and monetary freedom. Charting a relatively steady rise in economic freedom over two decades, Denmark reached “mostly free” status in 2002 and achieved its highest score of 79.6 in 2009.

Strongly underpinning Denmark’s economic dynamism, the judicial system, independent and free of corruption, enforces contracts reliably. Openness to global trade and investment has enabled Denmark to become one of the world’s most competitive and flexible economies. On the other hand, the overall tax regime that finances Denmark’s large-scale government programs remains burdensome and complex.

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Background

Helle Thorning-Schmidt became prime minister after a center-left coalition led by Social Democrats defeated Prime Minister Lars Løkke Rasmussen in the September 2011 parliamentary elections. She is Denmark’s first female prime minister. Denmark has been a member of the European Union since 1973. Its economy depends heavily on foreign trade, and the private sector is characterized by many small and medium-size companies. Increased immigration spurred by the 2011 uprisings in North Africa has caused the government to consider more restrictive immigration laws. Although not party to the euro, Denmark has felt the impact of the European economic crisis. Growth is sluggish, but unemployment remains relatively low.

Rule of LawView Methodology

Property Rights 90.0 Create a Graph using this measurement

Freedom From Corruption 93.7 Create a Graph using this measurement

Levels of corruption are generally very low in Denmark, which consistently receives some of the highest marks in Transparency International’s Corruption Perceptions Index. Protections for property rights are strongly enforced, with an independent judicial system institutionalized throughout the economy. Intellectual property rights are respected, and enforcement is consistent with world standards.

Limited GovernmentView Methodology

The top individual income tax rate is 56 percent, and the corporate tax rate is 25 percent. Other taxes include a value-added tax (VAT) and a tax on fatty foods. The overall tax burden is equivalent to 48 percent of GDP. Public expenditures finance 57.6 percent of the domestic economy, and public debt is about 50 percent of GDP. The eurozone crisis has slowed growth, hurting public finances.

Regulatory EfficiencyView Methodology

Denmark’s regulatory environment remains one of the world’s most efficient. Starting a business takes only four procedures, and minimum capital requirements have been reduced. Relatively flexible hiring and dismissal regulations sustain an efficient labor market. Monetary stability is well established, but rents are controlled, and medications are heavily subsidized. In 2013, green energy subsidies were reduced.

Open MarketsView Methodology

EU members have a low 1.1 percent average tariff rate and, in general, few non-tariff barriers to trade. Denmark is very open to foreign investment as well. The financial sector is competitive and diversified. After undergoing a period of uncertainty, the banking sector has become more stable. Banks’ dependence on state guarantees has been reduced, and prudential banking regulations have been strengthened.

Country's Score Over Time

Bar Graph of Denmark Economic Freedom Scores Over a Time Period

Country Comparisons

Bar Graphs comparing Denmark to other economic country groups

Regional Ranking

rank country overall change
1Switzerland81.60.6
2Ireland76.20.5
3Denmark76.10.0
4Estonia75.90.6
5United Kingdom74.90.1
6The Netherlands74.20.7
7Luxembourg74.20.0
8Germany73.40.6
9Finland73.4-0.6
10Sweden73.10.2
11Lithuania730.9
12Georgia72.60.4
13Iceland72.40.3
14Austria72.40.6
15Czech Republic72.21.3
16Norway70.90.4
17Belgium69.90.7
18Armenia68.9-0.5
19Latvia68.72.2
20Macedonia68.60.4
21Cyprus67.6-1.4
22Spain67.2-0.8
23Poland671.0
24Hungary 67-0.3
25Albania66.91.7
26Slovakia66.4-2.3
27Malta66.4-1.1
28Bulgaria65.70.7
29Romania65.50.4
30Turkey64.92.0
31Montenegro63.61.0
32Portugal63.50.4
33France63.5-0.6
34Slovenia62.71.0
35Italy60.90.3
36Croatia60.4-0.9
37Serbia 59.40.8
38Bosnia and Herzegovina58.41.1
39Moldova57.31.8
40Greece55.70.3
41Russia51.90.8
42Belarus50.12.1
43Ukraine49.33.0
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