The use of formal education in Denmark 1980-1992



1. Introduction

Education of the labour force is often seen as one of the most important factors for the
development and functioning of affluent economies. Denmark is such an economy with a GDP
per capita above those of Germany and the US. Furthermore inequality is low and even
decreased in the 1980’es. Denmark consists of only 5.1 million inhabitants closely
interconnected to Cental Europe, both in infrastructure (Border to Germany, and ferrylines to
Scandinavia, UK , Germany and Poland) and economically (EU-member since 1973). The
Danish economy has been extremely open to im- and export of all kinds of goods for decades.
The achievements of the Danish economy were attained under “open market terms”.

This article analyses the role of formal education for the development of the Danish economy.
It is important to underline, that the articles is about formal education and not about human
capital. Human capital is a much broader concept, including all kinds of productive attributes
embedded in the labour force: informal and on-the-job training, experience, health- and
nutritional status, etc. Education on the other hand, takes place in the educational system with
its teachers and classrooms, examinations and tests. Education is in contemporary societies a
huge business encompassing 1/4 of the total population, who have education as their daily
main activity: Pupils/students and teachers/professors from 1st grade to Ph.D. level.

What to explain?

Denmark is one of the richest countries in the world. In 1994 GDP per capita amounted to
28,181 US$ or 10% more than in US (figure 1). In the OECD only Japan and Switzerland had
higher GDP. To which extend can education of the Danes explain this achievement?

During the 1960es and 1970es the Danish welfare state was developed with high public
employment and high taxes. Moreover, due to inflation and income tax incentives for private
households to incur debts, construction of single family houses was high. In other words, for
many years the Danish economy and the use of labour was twisted toward domestic demands:
Labour and other productive resources were occupied in the domestic sectors . The result was
trade and current account balance deficits for more than two decades. However from the mid
1980es to the beginning of the 1990es a remarkable recovery took place: A deficit of more



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