Ž . Journal of Urban Economics 50, 517536 2001 doi:10.1006 juec.2001.2232, available online at http:www.idealibrary.com on Capitalization and the Voucher: An Analysis of Precinct Returns from California’s Proposition 174 1 Eric Brunner Department of Economics, San Diego State University, 5500 Campanile Drive, San Diego, California 92182-4485 Jon Sonstelie Department of Economics, University of California, Santa Barbara, Santa Barbara, California 93106 and Mark Thayer Department of Economics, San Diego State University, 5500 Campanile Drive, San Diego, California 92182-4485 Received October 10, 2000; revised April 6, 2001; published online July 18, 2001 In 1993, Californians voted on a school voucher initiative. We hypothesize that homeowners in good school districts understood the voucher to be a threat to their property values and thus voted against it. Precinct returns from Los Angeles County confirm this hypothesis. We also examine an alternative hypothesis explaining the relationship between school quality and precinct returns. According to the alternative, voters perceived the initiative to be a referendum on public school quality. To distin- guish between the two hypotheses, we compare the voting patterns of homeowners and renters. The comparison does not favor one hypothesis over the other.  2001 Academic Press 1. INTRODUCTION Among the many proposals to reform public education, the most fundamental is surely the voucher. The voucher would subsidize private elementary and 1 For helpful comments on a previous draft of this paper, we are grateful to Jan Brueckner, Timothy Goodspeed, Philip Graves, Lawrence Kenny, Terra McKinnish, Peter Rangazas, Richard Romano, Douglas Steigerwald, two anonymous referees, and seminar participants at the Air Force Academy, the University of Colorado, the University of California, San Diego, and the University of Texas. 517 0094-1190 01 $35.00 Copyright  2001 by Academic Press All rights of reproduction in any form reserved.