







































American Interdisciplinary Journal of Business 

and Economics 
ISSN: 2837-1909| Impact Factor : 6.71 

Volume. 10, Number 3; July-September, 2023; 

Published By: Scientific and Academic Development Institute (SADI) 

8933 Willis Ave Los Angeles, California 

https://sadipub.com/Journals/index.php/aijbe| editorial@sadipub.com 

 

 

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CHARTING ECONOMIC PROGRESS: RE-EXPORTS AND FIJI'S 

POLICY LANDSCAPE 
 

 

 

Hanson G. H, and Robert, F. C 
Department of Economics, the University of Fiji, Fiji 

https://doi.org/ 10.5281/zenodo.8233900 

Abstract: Re-exportation, the process of exporting commodities that undergo minimal or no value addition, 

has gained substantial prominence within the realm of international trade over the last decade. This surge in 

re-export activity has been closely linked to the growth in global trade, improvements in logistical efficiency, 

and the addressing of asymmetrical information. Notably, Hong Kong's re-export share has expanded from 

20% in the 1960s to a staggering 90% of current exports. A concurrent increase has been witnessed in the re-

export volumes of China and Hong Kong, rising from $179 billion in 2000 to $491 billion in 2016, as reported 

by the World Trade Organization (WTO). This phenomenon has also been influenced by factors such as 

escalating global transport volumes, evolving tariffs, quotas, and taxation regimes. Efficient logistical 

operations, as demonstrated by ports, play a pivotal role in facilitating cost-effective and competitive 

transportation, ensuring timely delivery of goods. Moreover, the acquisition of specialized knowledge on 

Chinese products by Hong Kong traders has enabled targeted marketing based on demand. However, concerns 

have been raised regarding the propagation of grey markets and tariff evasion by Hong Kong traders. Similar 

trends have been observed in other regions, such as Latvia, where re-exports have significantly contributed to 

merchandise exports. This study explores the dynamics of re-export behavior within the context of Fiji, an 

upper middle-income nation. The analysis encompasses an evaluation of the types and volumes of 

commodities traversing the Fijian hub. By shedding light on the re-export landscape, the study aims to offer 

valuable insights for Fiji's policymakers, fostering their understanding of how Fiji can effectively participate 

in the global re-export market. In this endeavor, the study examines the existing literature, presents an 

empirical model and data description, reveals empirical results, and concludes by providing a comprehensive 

outlook on the implications of re-export behavior for Fiji's economic integration into the global market. 

Keywords: Re-exportation, international trade, logistical efficiency, global transport volumes, tariffs, 

asymmetrical information, economic integration, Fiji, trade dynamics, global market participation. 

 

 

1. Introduction  

Re-exportation has coexisted with international trade, and in the last decade, re-export trading has immensely 
intensified. Ollus & Simola (2007) acknowledged that re-exports contributed 5%–15% of world exports in 

2002, and Hong Kong’s share of re-exports grew from about 20% in the 1960s to 90% of current exports. The 
WTO (2017) reported that Hong Kong’s and China’s re-exports have increased from $179 billion in 2000 to 

$491 billion in 2016. Moreover, the strong emergence of re-exports has been aligned with growth in 
international trade, logistical efficiency, addressing asymmetric information, and a robust increase in global 

transport volumes, tariffs, quotas and taxation (Hanson & Robert, 2001; Ollus & Simola, 2007).   



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The logistical readiness reflects the ports’ efficiency in ensuring effective and competitive transport activities 
that guarantee low-cost goods delivery. In addition, the Hong Kong traders have acquired specialized 

knowledge on Chinese products that enable traders to market the products to the relevant destinations based 
on demand. On the other hand, Fisman et al. (2007), as cited in Ollus & Simola (2007), criticized Hong Kong 

traders for propagating a grey market and evading Chinese tariffs. Furthermore, in Latvia, re-exports have 
accounted for a significant share of the total merchandise exports attributed to globalization (Beņkovskis, 

Bērziņa, & Zorgenfreija, 2016). An exogenous component for influencing the volume of re-exports is world 
trade, which was expected to grow by a modest 2.4% in 2017 with a forecast of 2.1%–4.0% for 2018 (WTO, 

2017).        

Re-exports represent commodities that are isolated from any further value adding in the intermediate economy; 
thus, it is re-exported in the original form in which it was imported. Moreover, there is a transfer of the 

commodity ownership to the purchasing economy. Hence, in transit trade, the ownership does not shift to the 
purchaser in the intermediate country. The dilemma of inclusion or exclusion of re-exports in trade statistics 

is subjective to the trade classification system. Ollus & Simola (2007) reported that under the general trade 
system, re-exports are recorded as both imports and exports; however, the special trade system (recommended 

by the UN) warrants the exclusion of re-exports from exports and imports. In addition, failure to properly 
account for re-exports will distort an economy’s market share and sector competitiveness. Moreover, ignoring 

re-exports may cloud the potential contribution of domestic exports to an economy’s progress. On the other 

hand, transiting commodities generate revenue for the domestic government. Benjamin, Golub, & Mbaye 
(2013) disclosed that the trade duties from re-exports are a major contributor to government revenue of The 

Gambia and Benin in Africa. Re-exports also generate revenue through repackaging, resale, and costs related 
to the storage and transportation of these commodities (Gehlhar, 2010). It is now easier than ever to link 

economies due to economic globalization (the interaction and integration of goods, services, capital, 
technology and information). The OECD (2017) reported that globalization encourages firms to restructure 

their production processes through international outsourcing and offshore activities. Benefiting from 
globalization without violating the basic concept of comparative advantage shapes global value chains 

(GVCs). GVCs combine different stages of production processes or supply side outputs of multiple countries 

in producing finished goods that link local producers to international markets. Fung (2013) summed up GVCs 
by suggesting that products made today are “made in the world” rather than in a single country. In light of 

GVCs, multinational companies have been perceived as agents of re-exports; however, intra firm trade 
involves the transfer of semi-finished products that must undergo value adding. According to Ollus & Simola 

(2007), only a fraction of intra-trade occurring between multinational companies can be regarded as re-
exportation.   

The Fiji Islands is a cluster of approximately 330 islands with a land mass of 18,333 sq km of which roughly 
a third is inhabited. During colonialism, Fiji gained access to the London market, revitalized its sugar industry 

that was highly capital intensive, addressed the labor shortage via the indenture system, and diversified into 

copra, bananas and gold to sustain trade balance with falling sandalwood, bêche-de-mer and cotton production 
(Gounder, 2013). The post-colonial era has been shadowed by political instabilities (the coups of 1987, 2000 

and 2006). The dominance of the agriculture sector has subsided, and in the 2000s, Fiji’s gross domestic 
product was primarily carried by the service sector followed by the manufacturing and agriculture sectors, 

respectively. Fiji is an upper middle-income country with a gross national income (GNI) per capita between 
$4,096 and $12,695 (World Bank, 2022). This study aspires to explore the re-export behavior in Fiji by 

examining the types and volumes of commodities transiting the Fijian hub. The study provides important 
insights for Fiji policy makers on how Fiji can converge and participate in the global re-exportation market. 

The rest of the article is organized as follows: Section 2 reviews the existing literature; Section 3 describes the 
empirical model and data; Section 4 discloses the empirical results; and Section 5 concludes.   

2. Literature Review  

Over the years, re-exports have been a substantial component of total exports surpassing the volume of 

domestic exports not only in Fiji but in numerous other countries as well. The contribution of re-exports to the 
gross domestic product (GDP) has nearly doubled in the past twenty years. Although the re-exportation of 



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goods does not transform the commodity in any way but value is added to it in terms of labelling and repacking, 
commonly termed as the re-export mark-up. It is basically the divergence from the import unit value and the 

export unit value (Dawer & Jain, 2015). Even though re-exports are considered a part of domestic exports, 
this inclusion may have several implications for the exporting country.   

A substantial amount of exports from Finland to Russia is made up of re-exports. Ollus & Simola (2007) 
examined the re-export behavior from Finland to Russia in 2005. High-value goods such as electronics and 

vehicles were under scrutiny. It is believed that re-exports misrepresent volumes of trade when they are not 
separated from exports, thus distorting the image of a country’s market share and consequently its 

competitiveness in the export market. Reexporting goods has become increasingly important for the Dutch 

economy over recent decades. Furthermore, re-exports have grown more rapidly during the past two decades 
than exports of Dutch-produced goods (Statistics Netherlands, 2016). Kusters & Verbruggen (2001) 

substantiate the claim that re-exports have been growing rapidly by studying the trends in the Dutch economy. 
However, they argue that the products that are reexported are not produced in the domestic country, thus the 

service, commercial and transport sectors will mostly be affected. The levels of employment and income are 
affected in the respective sectors of the economy as the commodities/transactions originate from another 

country. It is believed that recording re-export transactions should not have an impact on the trade balance 
since they would be crossed out, but the import prices may not always match the export prices, thus giving 

rise to over or underestimation of the prices.   

Moreover, as exports have conventionally been the drivers of economic growth, re-exports can mask the link 
between trade and economic growth thus altering the market share of a country. Additionally, as mentioned 

earlier, re-exports are included in determining the total merchandise trade value, but for some countries, such 
as Hong Kong, China, the volume of re-exports is so extensive (around $498 billion in 2015) that it has been 

excluded from the world and Asian aggregates. Burger, Thissen, Van Oort, & Diodato (2014) found that the 
classification of re-exported commodities as a component of total exports not only distorts the trading pattern 

but also affects the magnitude of trade. At times, the re-exports are double-counted as the final destination 
may differ from the registered destination leading to a fallacious volume of trade. A country’s internal trade is 

also impacted as large re-exports underestimate the proportion of domestic trade in a country. This study uses 

a new and coextensive dataset consisting of goods and services for 25 European countries and their dominant 
trading partners to examine the trade variations in commodities and services while controlling for the re-export 

of goods explicitly to determine the volume of trade in goods and services. It was concluded that although 
more goods are bilaterally traded in comparison to services, distance does not deter trade in services.    

Lankhuizen & Thissen (2014) argue that the data on bilateral trade flows are not adjusted for re-exports when 
estimating models of international trade, which indicates that a re-exporting country is taken as the country 

where trade has originated from as well as being the final destination of the trade flow. By not accommodating 
for reexportation, the trade data may result in distance decay of trade being erroneously valued, a country’s 

major trading partners may not be properly recognized and the volume of total world trade is therefore 

overvalued. Moreover, this may lead to a misguided export promotion policy by the policy makers and 
overvaluing the volume of trade will result in misrepresenting trade in achieving economic growth and 

development. This study attempts to correct these trade patterns by collating data from 40 countries listed in 
the World Input-Output Database with 59 categories of products from 2000 to 2012. The data was corrected 

for re-exports by employing a controlled non-linear accession method. The results revealed a significant 
difference in the trade of goods between countries (over 5% on average), and the distances are miscalculated, 

thus having consequences for a country’s trade policies.   
It is indisputable that lower trade barriers increase the movement of goods across the globe. A study by Rettab 

& Azzam (2008) took port expenses and their effect on the concentration of re-exports into consideration. 
They postulated that shipping costs and coordination are major factors influencing the clustering of re-exports. 

A relative statics model was formulated that measured the degree of the effect of port costs on the re-export 

concentration, and further developed predicaments under which the re-export intensity was inversely related 
to the port costs. The costs and re-export intensities were analyzed for five Asian ports, namely Mumbai, 

Dammam, Dubai, Hong Kong and Manama. The costs at ports included services offered there and the cost of 



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storage, transport and documentation. They discovered that the transportation costs and logistics had the most 
significant impact on re-export intensity.  Another study by Mellens, Noordman, & Verbruggen (2007) 

revealed that the growth of re-exports in the Netherlands has been booming and so is the re-exports in world 
trade. A total of ten European countries’ trade data was analyzed for this study by using the export performance 

index and market performance index. The result of this study indicates that the re-export values are double-
counted in the global trade figures. This depicts that the volume of world trade is expanding at a faster rate 

than the production of exports, which is clearly a misrepresentation of world trade. Despite these 
discrepancies, there are motivations for engaging in re-exportation activities, especially for some multinational 

firms. One major benefit highlighted in this study is that multinational companies often engage in these 

activities to avoid tax/tariffs or infringe quotas set by the government. An intermediate country is used by the 
country of origin to supply products to the destination country without being concerned about the tax/tariff 

regulations because it will be bypassing them. Apparent revelations about the trade indicators are that the 
growth of the export market is magnified, and there is an amplified loss of market share for manufacturers in 

the Netherlands. However, Beņkovskis et al. (2016) found that including re-exports not only magnifies the 
total exports market but also has other serious consequences. A study that examined Latvia’s re-exports used 

an anonymized firmlevel trade database which provides data from 2005 to 2013 with detailed information on 
international trade. The study revealed that when re-exports are part of total exports, the actual impact of 

shocks on certain commodities and trading partners are not measured accurately. There are more implications 

for the domestic economy as the real impact may be over or understated regarding certain commodities and 
trading partner countries. The study emphasized that re-exports should not be undermined since the average 

mark-ups on re-exports were significant, and that engaging in re-export activities may contribute to a country’s 
GDP.   

Despite the impediments of recording re-exports as part of domestic exports, this phenomenon has continued 
to grow. It offers lower transportation costs as many countries act as transport hubs of international trade in 

goods and they are well developed and have excessive storage space and transporting avenues. Large storage 
spaces and ease of transportation together with tariff avoidance are the factors that incentivize the growth of 

re-exportation.  

Moreover, as an intermediary, a re-exporting country may possess better knowledge on the product sources 
and markets in which the product is in demand, therefore reducing asymmetric information between the buyers 

and the sellers. Re-exporting generally applies to differentiated goods, such as machinery or electronic 
devices. Furthermore, it enhances efficiency and increases the ease of doing business between traders (Hanson 

& Robert, 2001).   

3. Data and Empirical Model  

The period of study is 1985–2018 with data sourced from the Fiji Bureau of Statistics. In compiling the data, 

there were two-phase interviews conducted by the researchers. The interviews involved consultation and 
deliberation on Fiji’s re-export market with personnel from the Fiji Bureau of Statistics and the trade unit in 

the Ministry of Industry, Trade and Tourism. The dataset includes revised trade balances for 2016 and 2017 

with provisional values for 2018. Annual time series data on total exports (FJ$ 000), domestic exports (FJ$ 
000), and reexports (FJ$ 000) was sourced from the Merchandise Trade Statistics release of the Fiji Bureau of 

Statistics.  
In ascertaining the importance and significance of re-exports, the explained variable of total exports is 

determined using re-exports and domestic exports. To establish the appropriate model, a unit root test using 
the augmented Dickey–Fuller (ADF) test was utilized to check the stationarity of the variables. The series 

were found to be stationary at level I(0) and at first difference I(1), thus it is appropriate to use the 
autoregressive distributed lag (ARDL) model. The ARDL model can capture both long-run and short-run 

relations of the cointegrated variables.    

The following model is used with data in log (LN) form:   

𝐿𝑁𝑇𝐸𝑋𝑃𝑡 = 𝛽0 + 𝛽1𝐿𝑁𝐷𝐸𝑋𝑃𝑡 +  𝛽2 𝐿𝑁𝑅𝐸𝑋𝑃𝑡 − 𝐷𝑖𝑠𝑟𝑢𝑝𝑡𝑖𝑜𝑛𝑠𝑡 + 𝜇𝑡       (1)  

Where LNTEXP is the total exports that represent annual merchandise exports for Fiji; LNDEXP is domestic 
exports capturing the commodities that were produced domestically in Fiji; and LNEXP signifies re-exported 



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commodities that are isolated from any further value adding in the intermediate economy and is thus re-
exported in the original form in which it was imported. Furthermore, it is expected that both domestic exports 

and re-exports will have a positive sign. In addition, disruptions capture the potential distortion to total exports. 
Disruptions used in this model are political instabilities, cyclones, drought, flash floods, and global economic 

crises, where the presence of disruptions = 1 and the absence of disruptions = 0. It is highly anticipated that 
disruptions will have a negative sign.   

The error correction version of the above is as follows: 

∆𝐿𝑁𝑇𝐸𝑋𝑃𝑡 =  𝛽0 + ∑𝑖 𝛽1∆𝐿𝑁𝑇𝐸𝑋𝑃𝑡−1 + ∑𝑖 𝛽2∆𝐿𝑁𝐷𝐸𝑋𝑃𝑡−1 + ∑𝑖 𝛽3∆𝐿𝑁𝑅𝐸𝑋𝑃𝑡−1 + 𝛼1𝐿𝑁𝑇𝐸𝑋𝑃𝑡−1 + 

𝛼2𝐿𝑁𝐷𝐸𝑋𝑃𝑡−1 + 𝛼3𝐿𝑁𝑅𝐸𝑋𝑃𝑡−1 − 𝐷𝑖𝑠𝑟𝑢𝑝𝑡𝑖𝑜𝑛𝑠𝑡 + 𝜇𝑡                                    (2) 

The ARDL (2,2,1,0) model was selected based on the Akaike Information Criterion. The above models were 

estimated using EViews 9.0.  

4. Empirical Results and Analysis  

This section presents the findings in two subsections. Subsection 4.1 displays graphical measures, and 
subsection  

4.2 presents the ARDL analysis.   

4.1. Graphical Measures  

Fiji’s total exports were immensely outlined by domestic exports until the late 2000s (see Figure 1). However, 

re-exports have abruptly re-shaped the total exports since 2009. As such, the fluctuations in re-exports narrated 

the movement in total exports, while domestic exports displayed calm and marginal disruptions. A momentary 
observation may favor re-exports outweighing domestic exports and criticize government efforts to promote 

domestic exports. However, the ratio of domestic exports to total exports dominates the total exports with the 
exception of the period from 2012 to 2014 (see Figure 2). Furthermore, re-exports have seen a substantial 

growth as a percentage of total exports from 2009. A notable finding is that re-exports have the capability of 
escorting total exports when domestic exports contract. An explicit case is the declining domestic exports 

percentage from 2009 to 2011 due to the floods in Fiji in January 2009, while escalating re-exports neutralized 
the anticipated drastic fall in total exports (see Figure 2).  

  
Figure 1. Fiji’s total exports, re-exports and domestic exports (FJ$ 000), 1985–2018.  

Source: Fiji Bureau of Statistics (2019).  

The disparity between the domestic export percentage and the re-export percentage to total exports in 1985 

was 40.46% and was dominated by domestic exports (Figure 2). However, in 2018 the disparity between the 

ratios is 12.56% with the domestic export ratio at 56.28% and the re-export ratio at 43.72%. This highlights 

the significant proportion of total export share captured by re-exports over the years. 



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Figure 2. Fiji’s domestic exports to total exports (%) and re-exports to total exports (%), 1985–2018.  

Source: Fiji Bureau of Statistics (2019). 

The findings do not imply that re-exports are superior to domestic exports or that re-exports can replace 

domestic exports. An investigation was carried out to re-affirm significance of re-exports as a probable cause 
for Fiji’s trade growth. The Reserve Bank of Fiji (2017) disclosed that Fiji acts as the regional transshipment 

hub for petroleum products as regional countries do not have the storage capacity to import petroleum. In 
2007, the national growth document, Sustainable Economic and Empowerment Development Strategy 

(SEEDS) 2008–2010, advocated diversifying the domestic export markets to improve Fiji’s involvement in 
the global market and its economic advancement. Furthermore, the Roadmap for Democracy and Sustainable 

Socio-economic Development (RDSSED) 2010–2014 outlined tools for domestic export promotion, such as 
the National Export Strategy and Demand Driven Approach. In 2014, the Green Growth Framework for Fiji: 

Restoring the Balance in Development that is Sustainable for Future complemented the RDSSED. An 

interesting phenomenon is the absence of including re-exports in national policies.  

4.2. Regression Analysis  

Table 1 presents the results of the ARDL test statistics specified in Equation 2 with total exports as the 

dependent variable. As anticipated, domestic exports and re-exports are highly significant positive 
determinants of total exports both in the short and long runs (see Table 2). Furthermore, the outputs below 

substantiate that reexportation is a significant predictor of total exports in Fiji. It is highly recommended that 
an inclusive national policy is implemented to explore the potential of re-exportation in Fiji.   

 



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Moreover, disruption is negative and not significant (see Table 2). It may be that political instability does not 
influence total exports because during political instability, when the traditional trading partners imposed trade 

sanctions, Fiji was able to successfully collaborate with Asian and North American markets. Thus, the export 
market was not compromised. In addition, the few possible justifications put forward for the adverse effects 

caused by cyclones, droughts and flash flooding are insignificant as these natural disasters do not affect all the 
divisions in Fiji simultaneously, the relief aid from other countries fast-track the recovery period, and the 

global prices of commodities that Fiji export may have revised upwards. In addition, spill-over from the global 

economic crisis may have been marginal for Fiji. Fiji is a Small Island Developing State and its participation 
in the global export market may have been too minimal to feel the full effects of the global crisis.  

Table 2. Variable coefficients: predicted and actual.  

Independent variable  Predicted Sign  Actual Sign – Long Run  Actual Sign – Short Run  

Domestic Exports  Positive  Positive, significant  Positive, significant  

Re-exports  Positive  Positive, significant  Positive, significant  

Disruptions  Negative  Negative, not significant  Negative, not significant  

  

Table 3 outlines the various residual diagnostic test results. The model generally satisfies the diagnostic 
criteria, such as the residuals being free of autocorrelation based on the Breusch–Godfrey serial correlation 

LM test. In addition, the model has the correct functional form (no misspecification) based on Ramsey’s 
RESET test and the residuals were normally distributed based on the Jarque–Bera test. Furthermore, the model 

is desirable (constant error variance) based on the Breusch–Pagan–Godfrey test. The error correction model 
cointegrating coefficient was -0.76, thus the long-run adjustment is 76% and significant. The model cleared 

the bounds test where the F-statistics rejected the null hypothesis at all significance levels establishing a long-

run relationship between the cointegrating variables. 

Table 3. Diagnostic tests.  

Test  Obs. R-squared  P-Value  

Serial correlation  2.548  0.2796  

Heteroscedasticity: BPG  13.213  0.1532  

Heteroscedasticity: ARCH  1.480  0.2236  

Functional Form  ---  0.8178  

Residual Normality  ---  0.3313  

     

5. Conclusion and Policy Implications  

Total exports encompass the re-exports and domestic exports in international trading accounts. Domestic 

exports include merchandise that is locally produced, while re-exports are commodities that are exported in 
their original imported form. The importance of re-exports to Fiji’s trade balance over the past few years is 

evident as reexports have dominated total exports overshadowing domestic exports. Countries only have an 
interim possession of the commodities that are exported but the gains from trade are attained at the macro 

level. These gains are in terms of the tax revenues generated by the government, revenues gained from the 
marked-up prices of the commodities, and revenue arising from transportation and storage costs as many ports 

act as hubs. Moreover, the benefits are not only limited to the gains realized by the exporting country but the 

costs for the trading partners are also reduced.   
Re-exportation further reduces the predicament of asymmetric information among trading partners. Taking 

into consideration the contributions of re-exports to total exports, the study entails an investigation to 
determine the significance of re-exports to Fiji’s total exports. Therefore, the short- and long-run effects of re-



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exports to total exports were analyzed using the ARDL approach and the results suggest that re-exports are a 
significant predictor of total exports in the short run as well as the long run.   

Currently, there is no policy on trade promotion with regard to re-exports in the National Export Strategy of 
Fiji, therefore, policies should be designed and directed towards enhancing the re-exports base to gain higher 

benefits from trade. Improving the storage capacities of Fiji’s ports will permit more bulk buying and on-time 
delivery of goods. Also, improving the infrastructure of the airports and the wharfs to cater for more cargo 

planes and vessels to facilitate faster delivery of goods to the destination countries will enhance the growth of 
the re-export sector in Fiji. Being the hub of the South Pacific, Fiji can reap the benefits of international trading 

by expanding its re-export capacity as the results suggest a high correlation between re-exports and total 

exports in the short and long runs.  

References  

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https://doi.org/10.1080/1406099x.2016.1163891.  

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goods. NBER Working Paper No. 8088, Cambridge.  

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