This paper presents a model in which production technology (scale and capital‐intensity) explains interindustry differences in the earnings of workers with similar skill in similarly attrative jobs. The empirical analysis shows that manufacturing industires fall into three segments with broadly similar production technologies, and that prodcut market and employment characteristics vary as expected across these segments. Capital intensity and job‐skill requirements are found to have positive wage effects for the full set of industries, but the resluts by segment suggest that the capital‐intensity effect increases, and the skill effects decreases, with the capital‐intensity of prodcution.