2018 Index of Economic Freedom

Denmark

overall score76.6
world rank12
Rule of Law

Property Rights84.8

Government Integrity84.1

Judicial Effectiveness83.6

Government Size

Government Spending10.6

Tax Burden41.4

Fiscal Health96.7

Regulatory Efficiency

Business Freedom92.5

Labor Freedom82.8

Monetary Freedom86.4

Open Markets

Trade Freedom86.9

Investment Freedom90.0

Financial Freedom80.0

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Quick Facts
  • Population:
    • 5.7 million
  • GDP (PPP):
    • $273.9 billion
    • 1.2% growth
    • 1.1% 5-year compound annual growth
    • $47,985 per capita
  • Unemployment:
    • 6.1%
  • Inflation (CPI):
    • 0.3%
  • FDI Inflow:
    • $950.7 million
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Denmark’s economic freedom score is 76.6, making its economy the 12th freest in the 2018 Index. Its overall score has increased by 1.5 points, led by improvements in the judicial effectiveness, tax burden, and government spending indicators. Denmark is ranked 6th among 44 countries in the Europe region, and its overall score is above the regional and world averages.

Denmark’s economy performs notably well in regulatory efficiency. Open-market policies sustain flexibility, competitiveness, and large trade and investment flows, and the transparent and efficient regulatory and legal environment encourages robust entrepreneurial activity. Banking regulations are sensible, and lending practices are prudent. Monetary stability is well maintained, and the judicial system provides strong protection for property rights. Political pressure for expanded government spending has been increasing, but 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

Denmark has evolved into a modern, prosperous nation. Lars Løkke Rasmussen’s center-right Liberal Party came in third in 2015 parliamentary elections, but Rasmussen became prime minister after forming a minority government. He also had served as prime minister from 2009 to 2011. The libertarian Liberal Alliance and the Conservative People’s Party joined Rasmussen’s alliance in November 2016, shoring up the minority government. 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, have reduced the number of migrant arrivals.

Rule of LawView Methodology

Property Rights 84.8 Create a Graph using this measurement

Government Integrity 84.1 Create a Graph using this measurement

Judicial Effectiveness 83.6 Create a Graph using this measurement

Contracts are strongly enforced, and real and intellectual property rights are fully protected by a trustworthy, independent, and fair judicial system that is deeply institutionalized throughout the country. Citizens enjoy full due-process rights. Levels of corruption are generally very low in Denmark, which was ranked first as the world’s least corrupt nation in Transparency International’s 2016 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 value-added and inheritance taxes. The overall tax burden equals 46.6 percent of total domestic income. Over the past three years, government spending has amounted to 54.6 percent of total output (GDP), and budget deficits have averaged 0.3 percent of GDP. Public debt is equivalent to 39.9 percent of GDP.

Regulatory EfficiencyView Methodology

Denmark has one of the world’s most attractive business environments and is characterized by political, economic, and regulatory soundness. The labor market is sustained by flexible and modern employment regulations. Monetary stability is well established, and the government is on course to end renewable energy subsidies within a few years.

Open MarketsView Methodology

Trade is significant for Denmark’s economy; the combined value of exports and imports equals 99 percent of GDP. The average applied tariff rate is 1.6 percent. Nontariff barriers impede some trade. In general, government policies do not interfere with foreign investment. After a period of uncertainty, banking has become more stable; dependence on state guarantees has been reduced, and prudential regulations have been strengthened.

Country's Score Over Time

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Regional Ranking

rank country overall change
1Switzerland81.70.2
2Ireland80.43.7
3Estonia78.8-0.3
4United Kingdom781.6
5Iceland772.6
6Denmark76.61.5
7Luxembourg76.40.5
8Sweden76.31.4
9Georgia76.20.2
10Netherlands76.20.4
11Lithuania75.3-0.5
12Norway74.30.3
13Czech Republic74.20.9
14Germany74.20.4
15Finland74.10.1
16Latvia73.6-1.2
17Austria71.8-0.5
18Macedonia71.30.6
19Romania69.4-0.3
20Armenia68.7-1.6
21Poland68.50.2
22Malta68.50.8
23Bulgaria68.30.4
24Cyprus67.8-0.1
25Belgium67.5-0.3
26Hungary 66.70.9
27Kosovo66.6-1.3
28Turkey65.40.2
29Slovakia65.3-0.4
30Spain65.11.5
31Slovenia64.85.6
32Albania64.50.1
33Montenegro64.32.3
34France63.90.6
35Portugal63.40.8
36Italy62.50.0
37Serbia 62.53.6
38Bosnia and Herzegovina61.41.2
39Croatia611.6
40Moldova58.40.4
41Russia58.21.1
42Belarus58.1-0.5
43Greece57.32.3
44Ukraine51.93.8
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