THE REDISTRIBUTION OF CORPORATE PLANT AND EQUIPMENT AS A RESULT OF THE ECONOMIC-RECOVERY TAX ACT OF 1981

Congress has enacted tax legislation in an attempt to alter corporate investment since 1954. The Economic Recovery Tax Act of 1981 (ERTA) co ntained several provisions which were enacted to stimulate corporate i nvestment. This paper considers the effect of ERTA on the distribution of corporate investment in plant and equipment. Analysis is based on several expectations models and dividing the firms into portfolios whi ch received differential benefits from the tax change. The results are fairly consistent across the expectations models and show evidence th at tax can have an impact on investment.