The economic importance of the European Single Market for Denmark

In this analysis, the isolated economic significance of Denmark's membership of the European Single Market is assessed. In other words, what would the Danish economy look like if in 1993 Denmark had not become part of the European Single Market. It is important to be aware of the uncertainties of such a counter-factual analysis. The analysis has been prepared for the Danish Business Authority.

The European Single Market was established in 1993 to promote economic integration among EU countries, thereby creating a foundation for increased growth and jobs. The foundation of the European Single Market is built on four freedoms: free movement of goods, of persons, of services and of capital.

Today, extensive economic activity in all parts of Denmark is linked to membership of the European Single Market, and this activity has been increasing since its establishment. Trade in goods and services has increased, more investments are crossing the borders and more people are moving to other countries. The progress must be seen in the light of economic globalisation, which has generally led to increasing economic integration between countries, but the European Single Market has brought about gains that are beyond the ordinary gains of globalisation.

Denmark's participation in the European Single Market has significant and lasting effects on the Danish economy. Denmark would have missed out on significant economic activity if we had not participated in the European Single Market. Value creation measured by gross domestic product (GDP) is estimated to be just over 5% higher today than if Denmark was not part of the European Single Market. This corresponds to GDP in 2016 being almost DKK 100 billion greater than it would have been otherwise.

The socio-economic gains have come about as a result of the integration process Denmark and the other EU countries have been through. The legislation in Denmark and the other EU countries has been adapted to reduce barriers to trade, investment and labour mobility. As a result, the Danish economy today is structurally better off through greater market demand, productivity gains and an increased supply of labour. However, it should be emphasised that the analysis is linked to uncertainty because it is inherently difficult to assess how it would have been if Denmark had not become part of the European Single Market.

The study is commissioned by The Danish Business Agency.

Links

Højbjerre Brauer Schultz (2017): "Det indre markeds økonomiske betydning for Danmark"

Højbjerre Brauer Schultz (2017): "Metodenotat - Det indre markeds økonomiske betydning for Danmark"