Since we already have a considerable and growing volume of literature on the wage adjustment mechanism in Japan, it is natural to wonder why I am adding one more to the list. Most of the econometric studies have been essentially aggregative in character, relating to wage adjustment for the economy as a whole. No existing model has as its purpose the quantification of regional differences in wage adjustment.
In this paper the major purpose is to be able to answer questions which are topical and important in current economic-policy-making, by adding together time series data over nine regions. The model presented here will give the quantitative relationships between wage inflation and labor demand, and the quantitative effect of wage adjustment spilling over from high-employment region to low employment region.
