Working paper: Geographical job mobility and wage flexibility in Denmark

Authors Kristoffersen, Mark Strøm
Subject Inflation, wages and prices; Economic activity and employment; Public finances and fiscal policy
Type Working paper
Year 2016
Published 8 January 2016
Flexibility in the labour market is important for macroeconomic stability. The Danish labour market has been highlighted as being flexible, which this study confirms using micro data from 1980 to the present.

​Flexibility in the labour market is important for macroeconomic stability. The Danish labour market has been highlighted as being flexible, which this study confirms using micro data from 1980 to the present. Unemployment insured workers are found to be less geographical job mobile than workers not insured against unemployment, especially for young workers. However, the substantial labour-market measures taken in the last 25 years seem to have improved geographical job mobility, especially among workers with unemployment insurance who experience unemployment during the year. Based on data since 1998, it is found that the incidence of downward wage rigidity is low in Denmark when compared to other countries. Wage flexibility is particularly high in export-oriented industries. Real wages are found to be downward rigid in the beginning of an economic downturn, but this rigidity declines during the downturn. The analyses employ matched employer-employee data from Denmark.