| Summary: | In this paper, we have derived the expression for dB<SUBf>/<SUBdr> when part of the imports are used as intermediate goods under the assumption of Cobb-Douglas production function. Assuming we start with total import equal to total export, (-1 -Em,p>) > 0 remains to be the condition for dB<SUBf>/dr > 0, whether we have imported inputs or not. According to the empirical results, most countries satisfy this condition. A qualification of our result is that since our imports composed of two parts, the traditional regression of total imports on real income and relative prices may suffer from specification error. The ideal method is to regress the import demand function for final consumption alone as indicated at the end of the last section.
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