Trade policy and wage gradients: evidence from a protectionist turn

In the spirit of Hanson (Econ J 107:113–133, 1997), we analyse, first, the existence of a relationship between the wage level and the market potential of Spanish regions; second, we explore the relative importance of domestic and foreign markets in this relationship; and finally, we examine the existence of a regional nominal wage gradient in Spain during the interwar period (1914–1930) centred on the main industrial cluster, Barcelona, and its transformation following the increase in protectionism in the Spanish economy as well as in the international economy. As suggested by NEG literature, our results support the hypothesis of a relationship between wages and regional market access and show the change in the regional wage structure following the gradual closing of the Spanish economy and of Spain’s trade partners, as a result of the increasing importance of the domestic market. We find evidence of the existence of a regional wage gradient centred on Barcelona which weakened during these years. Therefore, in Spain, during the interwar period, protectionist policies appear to have favoured the loss of centrality of a border region (Barcelona) and the relative rise of other locations.