Abstract ：
We explored the macroeconomic consequences of spatial wage spillover in Japan. We estimated a spatial panel data model with interdependent regional wages. Our findings suggest that spatial wage spillover among regions is heterogeneous and asymmetric. Wage shock in densely populated areas does not spread to other local areas, though wages in the local area spread to other regions. As a result, the effect of region-specific wage shock on aggregate wage level is larger in local areas than in densely populated areas. This result contributes to discussions on how to increase national wage and decrease regional disparity. Local areas, rather than densely populated areas, should be considered as a policy target to achieve short-run national wage increase.