The impact of wafer stepper overlay errors on device yields and design rules are studied. First, the classical Lynch model for normally distributed sizing and overlay errors is reformulated for orthogonal geometries. Then the distribution of overlay errors in the linear Perloff model describing global alignment is derived. Finally, a Monte Carlo program, OVS, for simulating stepper overlay errors is introduced. OVS is used to determine the impact of individual component errors, such as those due to lens distortion or to mask making, on the overall distribution of errors.