2016 Index of Economic Freedom

Denmark

overall score75.3
world rank12
Rule of Law

Property Rights95.0

Freedom From Corruption92.0

Limited Government

Government Spending2.3

Fiscal Freedom39.5

Regulatory Efficiency

Business Freedom95.4

Labor Freedom86.0

Monetary Freedom84.4

Open Markets

Trade Freedom88.0

Investment Freedom90.0

Financial Freedom80.0

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Quick Facts
  • Population:
    • 5.6 million
  • GDP (PPP):
    • $249.5 billion
    • 1.0% growth
    • 0.5% 5-year compound annual growth
    • $44,343 per capita
  • Unemployment:
    • 6.6%
  • Inflation (CPI):
    • 0.6%
  • FDI Inflow:
    • $3.7 billion
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The Danish economy continues to benefit from a high degree of regulatory efficiency. Open-market policies encourage flexibility, competitiveness, and flows of trade and investment, and the transparent and efficient legal environment facilitates robust entrepreneurial activity.

Economic Freedom Snapshot

  • 2016 Economic Freedom Score: 75.3 (down 1 point)
  • Economic Freedom Status: Mostly Free
  • Global Ranking: 12th
  • Regional Ranking: 5th in Europe
  • Notable Successes: Rule of Law, Regulatory Efficiency, and Open Markets
  • Concerns: Management of Public Finance
  • Overall Score Change Since 2012: –0.9

Public spending remains high, accounting for over half of GDP. The complicated tax regime finances the large scope of government activity through various direct and indirect taxes, and the overall tax burden is one of the world’s highest. Banking regulations are sensible, and lending practices have been relatively prudent. Monetary stability is well maintained, with inflationary pressures under control.

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Background

Social Democrat Prime Minister Helle Thorning-Schmidt’s center-left coalition defeated then-Prime Minister Lars Løkke Rasmussen in the September 2011 parliamentary elections. In 2015, a center-right coalition won more seats in parliament, and Rasmussen became prime minister again. 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. Increased immigration spurred by the 2011 uprisings in North Africa has led the government to consider more restrictive immigration laws. Although not party to the euro, Denmark has felt the impact of the European economic crisis. Economic growth has been sluggish, but unemployment remains relatively low. The government is considering proposals to move closer to a cashless economy.

Rule of LawView Methodology

Property Rights 95.0 Create a Graph using this measurement

Freedom From Corruption 92.0 Create a Graph using this measurement

Levels of corruption are generally very low in Denmark, which was ranked first out of 175 countries surveyed in Transparency International’s 2014 Corruption Perceptions Index. An independent and fair judicial system is institutionalized throughout the economy, and protection of property rights is strongly enforced. Intellectual property rights are respected, and enforcement is consistent with world standards.

Limited GovernmentView 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 almost 50 percent of total domestic income. Government spending amounts to more than 55 percent of GDP, and budget deficits are around 3 percent of GDP. Public debt equals just under 45 percent of total domestic output.

Regulatory EfficiencyView Methodology

The regulatory environment remains one of the world’s most efficient, and starting a business takes fewer procedures than the world averages. Relatively flexible hiring and dismissal regulations sustain an efficient labor market. Monetary stability is well established. June 2015 parliamentary elections centered on which party could best be trusted to deny immigrants access to Denmark’s generous welfare-state subsidies.

Open MarketsView Methodology

EU members have a 1 percent average tariff rate. Trade agreements are currently being negotiated with countries that include the United States and Japan. The economy is one of the world’s most open with respect to foreign investment, and the investment code is transparent and efficiently administered. The diversified financial sector has undergone a period of instability with several banks performing poorly.

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 Download Charts

Regional Ranking

rank country overall change
1Switzerland810.5
2Ireland77.30.7
3Estonia77.20.4
4United Kingdom76.40.6
5Denmark75.3-1.0
6Lithuania75.20.5
7The Netherlands74.60.9
8Germany74.40.6
9Luxembourg73.90.7
10Iceland73.31.3
11Czech Republic73.20.7
12Georgia72.6-0.4
13Finland72.6-0.8
14Sweden72-0.7
15Austria71.70.5
16Norway70.8-1.0
17Latvia70.40.7
18Poland69.30.7
19Cyprus68.70.8
20Spain68.50.9
21Belgium68.4-0.4
22Macedonia67.50.4
23Armenia67-0.1
24Malta66.70.2
25Slovakia66.6-0.6
26Hungary 66-0.8
27Albania65.90.2
28Bulgaria65.9-0.9
29Romania65.6-1.0
30Portugal65.1-0.2
31Montenegro64.90.2
32France62.3-0.2
33Serbia 62.12.1
34Turkey62.1-1.1
35Kosovo61.4N/A
36Italy61.2-0.5
37Slovenia60.60.3
38Croatia59.1-2.4
39Bosnia and Herzegovina58.6-0.4
40Moldova57.4-0.1
41Greece53.2-0.8
42Russia50.6-1.5
43Belarus48.8-1.0
44Ukraine46.8-0.1
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