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Voluntary Import Expansion And Direct Investment

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  • MASAO ODA
  • ROBERT STAPP

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.

Suggested Citation

  • Masao Oda & Robert Stapp, 2007. "Voluntary Import Expansion And Direct Investment," The Japanese Economic Review, Japanese Economic Association, vol. 58(1), pages 107-117, March.
    • Handle: RePEc:bla:jecrev:v:58:y:2007:i:1:p:107-117
    DOI: 10.1111/j.1468-5876.2007.00333.x
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