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During the sovereign debt crisis, many Euro countries have deployed "austerity packages" implementing structural reforms and cutting government spending. Such policies should have led to an initial decline in GDP followed by recovery and a reduction of the debt to gdp ratio. Key to this outcome is the size and sign of expenditure multipliers when the economy is in a recession. We estimate, for the Eurozone countries, expenditure multipliers in recession and expansion using the linear projection approach and forecast errors to identify exogenous expenditure shocks. The empirical evidence suggests that, in a recession, an increase in government spending will be effective in boosting aggregate demand, crowding-in private consumption in the short-to-medium run, without raising the debt to gdp ratio but rather decreasing it. The opposite applies in expansions. Estimates also show that expenditure multipliers, in a recession, are larger in high debt/deficit countries than in low debt/deficit countries. In a recession,fiscal consolidation based on expenditure cuts would have both short and medium run contractionary effects.

Competitive tendering is a popular mechanism for the provision of local bus services when a major objective is subsidy savings. Despite uncertainties in the legal framework some competitive tendering was implemented in Italy since 1998. The evidence so far is that participants were limited in number, the incumbents were almost everywhere able to gain the franchise, whilst subsidy savings were in many cases negligible. If some "political" conditions favouring more effective tendering procedures are not fulfilled, other regimes should be considered in order to obtain substantial subsidy savings.

We analyze the non-linear effects of government spending for the Euro area in recession, by using local projection method and by testing whether the impact of the shock depends crucially on the levels of public debt or the depth of the recession. We provide three insights. First, expenditure multipliers are not strongly state-dependent but they are always above unity. Second, state dependency emerges as soon as deep recession is distinguished from ordinary downturns. Third, fiscal space matters: expenditure multipliers are larger in low fiscal space, high debt, South-EZ countries than in low-debt, North-EZ countries.

Labor mobility is commonly taken as a property of an optimal currency area. But how does that property affect the outcome of fiscal policies? In our model, we show that perfect (costless) labour mobility is not necessarily welfare improving, since it prevents the national fiscal authorities from pursuing independent policies, opening the way to a coordination prob-lem. With symmetric shocks, the federal fiscal policy can improve welfare by playing a coordinating role. With asymmetric shocks, the federal policy allows both countries to reach a higher productive efficiency, provided the federal government is endowed with a federal budget.

Labor mobility is commonly taken as a property of an optimal currency area. But how does that property a¤ect the outcome of fiscal policies? We address this issue with a two country ?two period model, where both asymmetric and symmetric productivity shocks may hit the countries. We show that perfect (costless) labour mobility is not necessarily welfare improving, since it prevents the national fiscal authorities from pursuing indepen- dent policies, opening the way to a coordination problem between them, which is particularly relevant when the two countries di¤er for their intertemporal preferences. With symmetric shocks, the federal fiscal policy can improve welfare over national policies by playing a coordinating role. With asymmet- ric shocks, the federal fiscal policy allows both countries to reach a higher productive efficiency; to do that, the federal government must be endowed with a federal budget, playing a stronger role than plain coordination between countries.