Danish productivity during the upswing

Authors Jensen, Rasmus Mose; Jørgensen, Casper Winther Nguyen
Subject Danish Economy
Type Monetary Review  
Year 2016
Published 17 August 2016
Link to publication Monetary Review 2nd Quarter 2016
Productivity growth in the Danish economy has been weak in the wake of the financial crisis. This is especially the case from the 2nd half of 2015 and onwards when the decoupling of output and the labour market situation calls into question future productivity growth and the actual sustainability of the growth in employment seen during the last year or so. Nevertheless, the wage share of the employment-intensive private non-primary sector excluding transport does not indicate a general imbalance between productivity and wages. Consequently, the increase in employment is assessed to be sustainable. The low productivity growth is attributable to a series of factors, including falling North Sea production, lower capital intensity and between-sector shifts. Although productivity is a key driver of economic growth, it is not the only source of enhanced prosperity. A substantial improvement of the terms of trade and increasing return on foreign assets have contributed to prosperity in Denmark developing in line with that of other advanced economies since the financial crisis.