Abstract
This paper analyses the welfare effects of a market-share Voluntary Import Expansion (VIE) in the presence of foreign direct investment utilizing a duality approach. Introducing the cost burden of VIE explicitly, this paper considers the conditions under which a market-share VIE is voluntary to the importing country. It is shown that the voluntary nature of VIE depends upon the capital import, cost burden and price difference effects and that a VIE is truly voluntary if it is accompanied by direct investment. We also show the existence of a complementary relationship between VIE and direct investment in attaining a particular level of welfare.
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