2017 Index of Economic Freedom

Denmark

overall score75.1
world rank18
Rule of Law

Property Rights86.7

Government Integrity84.9

Judicial Effectiveness68.5

Government Size

Government Spending5.7

Tax Burden37.2

Fiscal Health95.4

Regulatory Efficiency

Business Freedom93.9

Labor Freedom85.8

Monetary Freedom85.5

Open Markets

Trade Freedom87.0

Investment Freedom90.0

Financial Freedom80.0

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Quick Facts
  • Population:
    • 5.6 million
  • GDP (PPP):
    • $258.7 billion
    • 1.2% growth
    • 0.7% 5-year compound annual growth
    • $45,709 per capita
  • Unemployment:
    • 6.3%
  • Inflation (CPI):
    • 0.5%
  • FDI Inflow:
    • $3.6 billion
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Denmark’s economy performs notably well in regulatory efficiency. Open-market policies sustain flexibility, competitiveness, and large flows of trade and investment, and the transparent and efficient regulatory and legal environment encourages robust entrepreneurial activity. Banking regulations are sensible, and lending practices have been prudent. Monetary stability is well maintained, and the judicial system provides strong protection for property rights.

Government spending has been expansive, and the overall tax regime needed to finance the ever-growing scope of government has become more burdensome and complex. However, such institutional assets as high degrees of business efficiency and regulatory flexibility have counterbalanced some of the shortcomings of heavy social spending.

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Background

Lars Løkke Rasmussen’s center-right Venstre party came in third in the June 2015 parliamentary elections, but Rasmussen became prime minister after forming a minority government. He also served as prime minister from 2009–2011. The center-left Social Democrats came in first in the election, and the Eurosceptic Danish People’s Party came in second. Denmark has been a member of the European Union since 1973. Its economy depends heavily on foreign trade, and the private sector includes many small and medium-size companies. Measures put in place to decrease immigration, including delayed family reunification and temporary border controls, appear to be having an impact.

Rule of LawView Methodology

Property Rights 86.7 Create a Graph using this measurement

Government Integrity 84.9 Create a Graph using this measurement

Judicial Effectiveness 68.5 Create a Graph using this measurement

With a trustworthy, independent, and fair judicial system institutionalized throughout the economy, protection of property rights is strongly enforced. Intellectual property rights are respected, and enforcement is consistent with world standards. Levels of corruption are generally very low in Denmark, which was ranked first out of 168 countries surveyed in Transparency International’s 2015 Corruption Perceptions Index.

Government SizeView Methodology

The top personal income tax rate is 56 percent, and the top corporate tax rate is 23.5 percent. Other taxes include a value-added tax and an inheritance tax. The overall tax burden equals 50.9 percent of total domestic income. Government spending has amounted to 56.1 percent of total output (GDP) over the past three years, and budget deficits have averaged 0.5 percent of GDP. Public debt is equivalent to 45.6 percent of GDP.

Regulatory EfficiencyView Methodology

The overall regulatory environment remains transparent and efficient. Launching a business takes fewer days and procedures than the world averages. Flexible and modern employment regulations sustain the labor market. Monetary stability is well established. Energy prices fell in 2016. Denmark has increased subsidies to maintain its renewable energy program but has declined to buy expensive new wind turbines.

Open MarketsView Methodology

Trade is extremely important to Denmark’s economy; the value of exports and imports taken together equals 100 percent of GDP. The average applied tariff rate is 1.5 percent, and there are few barriers to foreign trade and investment. The financial system is competitive and resilient. The banking sector, characterized by relatively prudent lending in a sound regulatory framework, has regained its stability after a period of uncertainty.

Country's Score Over Time

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Regional Ranking

rank country overall change
1Switzerland81.50.5
2Estonia79.11.9
3Ireland76.7-0.6
4United Kingdom76.40.0
5Georgia763.4
6Luxembourg75.92.0
7The Netherlands75.81.2
8Lithuania75.80.6
9Denmark75.1-0.2
10Sweden74.92.9
11Latvia74.84.4
12Iceland74.41.1
13Finland741.4
14Norway743.2
15Germany73.8-0.6
16Czech Republic73.30.1
17Austria72.30.6
18Macedonia70.73.2
19Armenia70.33.3
20Romania69.74.1
21Poland68.3-1.0
22Kosovo67.96.5
23Bulgaria67.92.0
24Cyprus67.9-0.8
25Belgium67.8-0.6
26Malta67.71.0
27Hungary 65.8-0.2
28Slovakia65.7-0.9
29Turkey65.23.1
30Albania64.4-1.5
31Spain63.6-4.9
32France63.31.0
33Portugal62.6-2.5
34Italy62.51.3
35Montenegro62-2.9
36Bosnia and Herzegovina60.21.6
37Croatia59.40.3
38Slovenia59.2-1.4
39Serbia 58.9-3.2
40Belarus58.69.8
41Moldova580.6
42Russia57.16.5
43Greece551.8
44Ukraine48.11.3
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