“…The elements of S m W (m 1, 2, 3) may therefore be interpreted as weighted average wages outside industry i but in the same 1-digit division in the case of S 1 ; in the same 2-digit group for S 2 ; and in all industries (weighted by employment¯ows) for S 3 . 3 Conditional on S 1 À S 3 , spillovers between wages in industry i, W i , and in other industries, W j , may be modelled by adopting autoregressive structures used in spatial econometrics (Anselin, 1988;Manning, 1994a). Given the n-industry vector of wages W, a simple model of spillovers is:…”