Work Incentives in the Danish Welfare State


August 1995


Externally reviewed

New Empirical Evidence


Written by: Gunnar Viby Mogensen


In Denmark, as in other Nordic countries, the period since the 1950s has witnessed the development of a modern welfare state with comprehensive public responsibility for the social well-being of the population. But how does this very fine-meshed safety net affect the labour supply – both on the market for legally registered, taxed labour, and on the market for undeclared ‘black’ labour? Does the welfare state provide too few incentives for the unemployed to seek work, and for those who are employed to work longer hours? And is it the case that the incentive structure encourages do-it-yourself activities?