HE main objective of this paper is to suggest an econometric technique for identifying and testing the existence and structure of the spillover effects in the wage determination process. The main notion underlying the socalled spillovers hypothesis is that the wage settlements achieved by the ill' industry's bargaining units reflect not only the traditional labor and product market forces affecting the it' industry but also the wage settlements achieved by the jth industry's bargaining units. The terminology used to describe this process has varied considerably-pattern wage-adjustment, key-bargains, spillovers, imitation and dynamic market-interdependence.1 The research strategy underlying this paper is to decompose the wage changes into two components -a deterministic component that can be explained in terms of exogenous labor and product market forces, industry specific or economy-wide, and a residual component. Does this residual wage component stand for purely random effects or does it represent some spillover effects? One can study the covariance structure of the residual wage vector to make inferences about the dynamic interdependence in wage movements between different industries. The plan of the paper is as follows: In section I a brief review of the literature is presented. In section II the underlying theoretical model is explained and the estimates of the empirical model are presented. In section III some simulation experiments of the spillover structure are presented. In section IV the conclusions and policy implications are discussed. 1. Literature Review

Sims's finding that nominal money stock is strictly exogenous in a distributed-lag regression of nominal income on nominal money stock is not inconsistent with the appearance and real income and nominal interest rates as strictly exogenous regressors in the quarterly money-demand equations estimated in real form. This strict exogeneity of real income and interest rates in real money-demand equations is due to the restriction implied by estimation in the real form, and these implicit restrictions seem to conflict with the sample information.

Sims's finding that nominal money stock is strictly exogenous in a distributed-lag regression of nominal income on nominal money stock is not inconsistent with the appearance and real income and nominal interest rates as strictly exogenous regressors in the quarterly money-demand equations estimated in real form. This strict exogeneity of real income and interest rates in real money-demand equations is due to the restriction implied by estimation in the real form, and these implicit restrictions seem to conflict with the sample information.

Using recently developed statistical techniques for examining the causal patterns between two variables within a bivariate distributed lag system, it is shown that, for the U.S. historical sample period 1954-70, money wages and consumer prices are simultaneously determined. This bidirectional feedback structure between wages and prices appears very strongly at the manufacturing level, though there is some evidence that such a structure does hold at the industry level, too. The structure of the casual patterns observed between industry money wages and prices for this sample period is not related to the industry market structure.

Using recently developed statistical techniques for examining the causal patterns between two variables within a bivariate distributed lag system, it is shown that, for the U.S. historical sample period 1954-70, money wages and consumer prices are simultaneously determined. This bidirectional feedback structure between wages and prices appears very strongly at the manufacturing level, though there is some evidence that such a structure does hold at the industry level, too. The structure of the casual patterns observed between industry money wages and prices for this sample period is not related to the industry market structure.