Company cars, juridically owned cars possessed and used privately by employees, are common in most OECD countries. The cost of possessing and using these cars is generally lower than if the car was bought privately, which leads to welfare losses from increased car possession and expenditure. However, the previous literature has taken the productivity of the employee receiving a company car as given. We believe that there are two ways company cars can impact productivity. First, the lower cost of company cars than privately owned cars also implies a lower commuting cost. This may enable the employee to accept an employer further away, that may be a more productive match. Second, the employee would pay more in income tax if they received the monetary value of the company car as an increased wage rather than a company car. This decrease in the marginal tax rate may induce the employee to take on a more demanding position where they are more productive. 

To estimate the effect of company car possession on productivity (taken as gross wage earnings) and tax revenues, we use fixed effects models applied to Swedish registry micro panel data from 2005 to 2020. The rich dataset contains socio-demographic variables for all adult Swedish individuals, where we can observe the residential location and the firm location for all workers. We only consider employed individuals, yielding 54 million observations. We take gross wage earnings to include cash wage earnings, social service contributions, and potential car costs if the employee is given a company car. Tax revenues include labour tax on wage earnings, the fringe benefit value from the company car, and social service contributions.