Market Access and Intermediate Goods Trade

The role of importer access to the finished goods market in intermediate goods trade is examinedby estimating the gravity-like equation derived from the NEG model. Importer access to demandfor finished goods is calculated by using the estimates in the gravity equation for finished goodstrade, and then intermediate goods trade is regressed on the importer access. Results indicate thatimports of intermediate goods are sensitive not only to the magnitude of importer demand forfinished goods but also to the demand of neighboring countries. Using results of the regression,the impact of US finished goods market expansion on intermediate goods trade in each country issimulated.