An intertemporal linear price model with extractions

The problem of competitiveness has becoming one of the main concerns of European governments. This is reflected trough out the Europe 2020 Strategy that includes as key priority the promotion of efficient and productive use of inputs. Differently to other "well-behaved" European "neighbours", in Spain, productivity growth closely connected to competitiveness improvements has been remarkably slow during the last decade. Then, this paper is a first attempt to shed some light about the main determinants of national prices, taking into account the role played by inter-sectoral linkages. In these lines, the contribution of the present analysis is two-fold. Firstly, differently to what is common practice in the Input-Output literature, we have evaluating endogenous price impacts using the HEM for yearly Spanish Input-Output data that relates to the periods 2000 and 2007. In our view, this novel approach helps to identify which production units might be considered as "first best candidates" for those policies that pursue to improve overall efficiency levels and thus, competitiveness. Secondly, we have introduced a longitudinal dimension to the aforementioned evaluated "price linkage indicator". In doing so, we have used a simple version of the well-known structural decomposition analysis, breaking down the variation of the sectoral "price linkage measure" between the two periods here considered into the contribution of both, changes in intermediate-demand technology and value-added technology .