VOTING WITH CAPITALIZATION

This paper analyses the behavior of an imperfectly mobile voter in the presence of house value capitalization. It is shown that the voter's ideal public spending level reflects a blend of his own preferences and those of the eventual buyer of his house. The voter does not seek to maximize the value of his house, although his behavior conforms more closely to this principle the nearer is the date of his departure from the community or the greater is the chance of early departure when he is uncertain about the future. Finally, the analysis shows that voters who are liquidity-constrained are more likely to behave like property-value-maximizers than those who are unconstrained (these results require the absence of income effects).