Tax systems that favour company cars for personal use could cause households to have more cars. It could also affect the choice of fuel type. We investigate the relationship between household car choices and access to a company car through a difference-in-differences design using Norwegian microdata. We find that access to a company car is associated with an increase in the total number of cars and the number of combustion-engine cars. For electric cars, the results are inconclusive. However, wage growth and access to company cars are also positively correlated. Therefore, we cannot interpret the difference in the number of cars between the treatment and control groups as a causal effect of the company car scheme, but as a correlation. Still, existing evidence on the income elasticity of car demand suggests that the increase in the number of cars is unlikely to be driven by wage growth alone.

Company cars and household car choices