Denmark the New “American Dream”? PIIE

Denmark may represent a new version of the American dream, as voters and Democratic candidates in the US presidential race seek secure benefits, especially affordable health care. An OECD study suggests that low-income families in Denmark, due to reduced inequality, can enter the middle class in two generations whereas low-income US families require five generations. Such reduced inequality comes with a cost, notes Jacob Funk Kirkegaard for the Peterson Institute for International Economics. “Denmark taxes benefits heavily, levies high value-added tax on all consumption, and offers few tax breaks for social purposes, but Danes spend little in private social expenditures,” he explains. “When factoring in these hidden cost savings and low private expenditures, true Danish social spending totaled 25.4 percent of GDP in 2015, almost 5 percentage points lower than the 30 percent of GDP in net total US social expenditures.” Billionaires should rest easy, as Denmark and other Scandinavian nations keep pace with the United States and share a similar proportion of billionaires. – YaleGlobal

Denmark the New “American Dream”? PIIE

Democratic candidates in the 2020 US presidential race aim to convince voters on more social benefits and reduced inequality – with comparisons to Denmark
Jacob Funk Kirkegaard
Monday, March 2, 2020

Read the analysis from Peterson Institute for International Economics that compares the US and Denmark.

Jacob Funk Kirkegaard, senior fellow, has been associated with the Institute since 2002.

Two Market Economies Compared US	Denmark                           Population 327 million	5.6 million                  Top marginal tax rate 37%	           60.2%        Government spending, % of GDP    36.2%	           51.5% Government social spending, % of GDP    18.7%	           28%         Billionaires per million people 1.79	           1.74

Taxes and spending: The United States and Denmark are each market economies and democracies; citizens of the latter tend to support higher tax rates for investment in social services (Source: Peterson Institute for International Economics )

Number of generations for offspring of bottom 10 percent to reach median income Denmark	2 Norway, Finland, Sweden	3 Spain, Canada, Japan	4 S Korea, US, UK	5 France, Germany	6 India, China	8 Brazil, Suth Africa	10

Fast upward mobility:  Children in families with the lowest 10 percent of  income confront challenges in some societies to reach the middle class due to varying levels of education, health and other social supports or disadvantages; the estimates are simulation-based and intended to be illustrative (Source: Data, Organisation for Economic Co-operation and Development; photo, UNICEF)

2020 Peterson Institute for International Economics. All rights reserved.

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