tempted to go a little further and suggest that the degree of concentration as such does not contribute materially to the explanation of high profitability. Perhaps this is not surprising because although a highly concentrated industry may be associated with high profitability a large number of situations are possible depending, amongst other things, on whether the industry is expanding or contracting, and on the degree of internal, intra industry, and potential competition. Secondly, the analysis shows clearly the importance of very high barriers to entry arising for instance, from control over raw materials, patent protection and economies of scale. In these cases the means exist whereby firms can maintain high profitability over a long run of years. A concern for barriers to entry should certainly be central to the implementation of a monopoly policy. Thirdly, the highly significant relationship between growth and profitability is a well established one,3 and any monopoly policy which is based on realised profitability should at least distinguish between fast and slow growing industries or (ideally) firms, and attempt to assess the extent to which high profitability is 'justified' by a high rate of growth. STATISTICAL APPENDIX

JN an earlier paper we have reported that manufacturing plants in two digit industries tend to cluster around an expansion path characterised by constant input output elasticities [4]. We have also argued that the nature of the path provides a motivation for the plants to grow, and this motivation has been further strengthened by the shifts of the path that took place. The question of differential rates of growth exhibited by the different plants still remains. Given an expansion path that excludes any optimal plant size, why should some plants exhibit a higher rate of growth than others? The question may be paraphrased in other ways. What determines a change in market share? 1 What is the source of competitive advantage enjoyed by some plants and not by others so that they grow at different rates? As we have shown elsewhere [5], part of the answer is in the nature of the expansion path and the relative position of the plants along the path. In this paper we will investigate whether the deviation of plants from the expansion path is also relevant in explaining their growth performance. The paper is in three sections. In the first section we analyze the duration of competitive advantage enjoyed by the plants. Where plants possess only a temporary competitive advantage randomly distributed among all the plants, a lognormal size distribution of plants ensues. On the other hand, where plants enjoy a persistent competitive advantage, the resulting systematic relationship between size and the rate of growth leads ultimately to a concentration of the market in the hands of a few large plants. The duration of competitive advantage depends on the source of competitive advantage. In the second section we focus on technology difference-measured by the different deviations of plant observations from the expansion path in a certain directionas a possible source. It is found that advanced technology contributes to the likelihood that a plant could maintain or expand its share of the market. However, superiority in technology of a given plant turns out to be generally transitory and appears to be related to the age of its machines and equipment. This suggests the hypothesis that, with technological progress, the natural life of machinery and equipment dominates the extent and the outcome of technology competition. Competition for market also comes from new entries. In the final section we find that new plants in an industry are characterized by greater capital intensity and therefore enjoy a competitive advantage at times of rising wages. In fact, the great significance of entry and exit indicates that the market share change is to a large extent related to the building of new plants and the abandoning of old plants. It is in this connection that technological progress and the change in the relative price of factors have the most significant impact on the competition for market.

CLASSIC studies by Kuznets have found that in more developed countries the size distribution of income among persons and among families has become less unequal during the twentieth century [15, 16]. The significance and magniture of this secular equalization of personal incomes can be estimated from time series only when cyclical behavior of the distribution of income is statistically separated from secular trend.' A purpose of this investigation is to propose an aggregate model that incorporates cyclical factors that are hypothesized to displace the distribution of income from its secular or equilibrium trend. Annual personal income data for the Netherlands are used to estimate the model and test the hypotheses implicit in it. The following conclusions emerge: (1) income inequality has decreased markedly in the Netherlands during the last fifty years; (2) secular equalization of incomes stems from the inseparable effects of the increased labor share of income and its more equal distribution; (3) the secular trend is stronger when variation in income associated with age and sex characteristics of the population are eliminated; (4) aggregate disequilibrium in factor markets that induce cyclical change in price and employment levels appears to account for much of the behavior of income inequality; (5) the distributional effect of changes in the price level has reversed and the effect of change in labor productivity has increased in the period since the Second World War.