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Many developing countries are establishing a new export sector by accepting foreign direct investment. Developing a three-sectors three-factors general equilibrium model with tariff, this paper considers the condition under which the acceptance of direct investment is desirable for the developing countries. We show that the factor intensity rankings among the sectors play a key role on the welfare effects and that direct investment increases the output of both the new export and the traditional export sector and promotes the export-led growth in developing countries.New export sector, direct investment, factor intensity,

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 marketshare 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. JEL Classification Numbers: F13, F21.

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