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A Flexicurity Labour Market in the Great Recession: The Case of Denmark


Torben M. Andersen


University of Aarhus - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute); Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics


IZA Discussion Paper No. 5710

Abstract:     
Flexicurity labour markets are characterised by flexible hiring/firing rules, generous social safety net, and active labour market policies. How can such labour markets cope with the consequences of the Great Recession? Larger labour shedding is to be expected and this strains the social safety net and increases the demands on active labour market policies. This paper takes a closer look at the labour market consequences of the crisis for Denmark. It is found that employment adjustment is not particularly large in international comparison, although it has more weight on the extensive (number of employees) than the intensive (hours) margin. The level of job creation remains high, although job creation is pro-cyclical and job-separation counter-cyclical. As a consequence most unemployment spells remain short. This is critical since a persistent increase in unemployment will affect the financial balance of the model severely. Comparative evidence does not, however, indicate that flexicurity markets are more prone to persistence. Crucial for this is the design of the social safety net and in particular the active labour market policy. However, the larger inflow into activation raises questions concerning the possibility of maintaining the efficiency of the system.

Number of Pages in PDF File: 30

Keywords: flexicurity, employment protection, unemployment insurance, active labour market policy

JEL Classification: J01


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Date posted: May 23, 2011  

Suggested Citation

Andersen, Torben M., A Flexicurity Labour Market in the Great Recession: The Case of Denmark. IZA Discussion Paper No. 5710. Available at SSRN: https://ssrn.com/abstract=1849465

Contact Information

Torben M. Andersen (Contact Author)
University of Aarhus - Department of Economics ( email )
University Park
Building 322
DK-8000 Aarhus C
Denmark
+45 8 942 1609 (Phone)
+45 8 613 6334 (Fax)
CESifo (Center for Economic Studies and Ifo Institute)
Poschinger Str. 5
Munich, DE-81679
Germany

Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
IZA Institute of Labor Economics
P.O. Box 7240
Bonn, D-53072
Germany

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