Most developing countries depend heavily on imported resources in the form of raw materials or supplemental capital to increase their per capita income. However, most of the conventional macromodels have neglected the factor input aspect of imports. These models have depicted the aggregate-producing sector as employing primary factors, capital and labor, to produce a single final output which is used to satisfy domestic and foreign demands. Imports are generally treated as either final goods or intermediate goods.' Despite this, in the literature there does exist a keen awareness of the role of imports as a factor of production. In an earlier study on India for 1959-60, MacDougall emphasizes the gravity of the scarcity of imported resources for the Indian manufacturing sector, claiming that "many factories are today lying partially idle through lack of imported supplies. . . . One third of the industries covered appear to be working at only 60 percent of capacity or less."2 In their seminal study, Chenery and Strout lend further support to the notion that imports are productive inputs by stating that "the inflow of external resources has become virtually a separate factor of production, whose productivity and allocation provide one of the central problems for a modern theory of development."3 More recently, some studies have been conducted which use U.S. and Canadian data to examine the role of imports as a factor of production.4 These studies find that imports and capital services are complementary inputs for the United States and for Canada.5 Unfortunately, there are no studies on the role of imports as a factor input for developing countries which examine the degree of substitutability or complementarity between imports and domestic primary factors. In this paper we propose to estimate the demand for imports as a factor of