We test whether the sharp increase in sovereign spreads of euro-area countries with respect to Germany after the explosion of the Greek crisis was due to deteriorating macroeconomic and fiscal fundamentals or to some form of financial contagion. Our analysis includes indicators of domestic and external imbalances which were mostly disregarded by previous studies, and distinguishes between investors' increased attention to the variables which ultimately determine the creditworthiness of a sovereign borrower (wake-up-call contagion) and behaviour not linked to fundamentals (pure contagion). We find evidence of wake-upcall contagion but not of pure contagion. Ã The views expressed in the paper do not necessarily reflect those of the Bank of Italy. We are indebted to

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We explore how electoral rules and cultural traits (namely, the degree of civicness) interact in shaping elected officials' behaviour. We use a dataset that includes the expenditure proposals sponsored by members of the Italian Senate from 1993 to 2012 (as well as other individual and district characteristics) and exploit the 2005 electoral reform that transformed a mainly majoritarian system into a proportional one. As a first step, we can confirm previous empirical findings: legislators elected in first-past-the-post districts show a higher propensity to sponsor locally-oriented bills and to put effort into legislative activity than those elected with a closed-list proportional system. More importantly, however, we find that the effects of the change in the electoral rules are muted in areas with a high degree of civicness. We also propose a simple theoretical probabilistic voting model with altruistic preferences that is able to rationalize this finding.

This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.This paper shows that increasing government social expenditures can make a substantive contribution to increasing household consumption in China. The paper first undertakes an empirical study of the relationship between the savings rate and social expenditures for a panel of OECD countries and provides illustrative estimates of their implications for China. It then applies a generational accounting framework to Chinese household income survey data. This analysis suggests that a sustained 1 percent of GDP increase in public expenditures, distributed equally across education, health, and pensions, would result in a permanent increase the household consumption ratio of 1¼ percentage points of GDP.