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CEFAU Brief: Proposal for an Alternative Benefit Indexation Mechanism that Ensures a More Stable Real Income for Recipients of Transfer Payments

Marie Møller Kjeldsen — Fri, 23 Jan 2026 16:19:42 +0100

In recent times, grocery prices have been a topic of debate. Many Danes experience that their everyday shopping has become more expensive which has led to political proposals for differentiated VAT and temporary food vouchers. Part of the background for these political proposals is that the real income of transferpayment recipients declined in connection with the surge in inflation in 2022 and has still not returned to its previous level. This policy note proposes an alternative indexation model under which the real income of transferpayment recipients would not experience prolonged declines the next time inflation jumps.

The analysis shows that:

In the event of sudden increases in inflation, there may be a prolonged decline in the real income of transferpayment recipients. This is due to the current indexation method. This has direct consequences for recipients of transfers, but also affects the overall economy as weaker private consumption can contribute to lower overall economic activity.
We propose a new indexation method that takes into account the expected development in inflation in the coming year. Current and wellfounded inflation forecasts are crucial to the methods ability to protect the real income of transferpayment recipients against unintended declines.
Had the proposed indexation method been in effect from 2020, transferpayment recipients would not have experienced as large or as prolonged a decline in real income during the inflation surge in 2022 as occurred under the current adjustment mechanism.
By basing indexation on expected inflation combined with a correction for previous forecast errors, it is possible to ensure that transfers develop over time in the same way as they do today. The proposed method does not change the total level of payments, only their timing.
Under certain reasonable assumptions, the proposed method can be implemented without requiring phasein periods or transitional arrangements.

The proposal can be read here.

Op-ed: Differentiated VAT is a really, really bad idea

Marie Møller Kjeldsen — Tue, 21 Oct 2025 11:29:57 +0200

Several political parties have proposed introducing differentiated VAT with a lower rate on food items. Considerations for low-income groups struggling to make ends meet, a desire to promote public health, and rising food prices have been cited as reasons for lowering VAT on certain foods.

However, regardless of the problem one wishes to solve, there are better solutions than changing VAT. Altering VAT would be an unnecessarily expensive way to achieve the intended goals. And the unnecessary additional cost of solving these issues through VAT would have to be paid by citizens through higher taxes, reduced public services, or lower social benefits.

On Friday 17 October 2025, Politiken published an op-ed by, among others, Senior Analyst Marie Møller Kjeldsen and Centre Director Michael Svarer arguing for the preservation of a uniform VAT rate and proposing alternative (and more cost-effective) solutions to the challenges that differentiated VAT has been suggested to address.

CEFAU Brief: Corporate Mergers Increase Macroeconomic Volatility

Marie Møller Kjeldsen — Tue, 07 Oct 2025 15:50:00 +0200

When authorities assess whether a corporate merger can be approved, they primarily consider how the merger affects competition in the market where the merging firms operate. However, new peer-reviewed research by CEFAU researcher Jackie M.L. Chan shows that corporate mergers also make the overall economy more volatile. Larger business cycle fluctuations impact firms, households, and public finances alike. Policymakers and competition authorities should therefore be aware that, beyond the effects on market competition, mergers may also have broader implications for economic stability.

Today, we are publishing a CEFAU Research Brief based on Jackie's article which summarizes and contextualizes the findings. Key takeaways include:

Corporate mergers increase volatility in the overall Danish economy
Mergers may, however, make the involved firms more stable
Firms that engage in mergers are significantly larger than other firms.

The brief explains how the results were derived and why they are relevant for policymakers and competition authorities.