Influence of the public sector on activity in Denmark, 1929-39

Abstract

The article presents the first quantification of Denmark's discretionary fiscal policy of the 1930s. The measuring of the discretionary budget effects is based on a revision of the changes in the aggregate public sector budget balance and a computation of the size of the automatic stabilisers. It is shown that Danish fiscal policy became steadily more contractive between 1932/33 and 1936/37, while changes in an expansive direction occurred only in 1931/32 and in the late 1930s. It is concluded that the fiscal policy pursued in Denmark had considerably more points of similarity with fiscal policy in Great Britain than with the Swedish policy of the 1930s.