Intra-industrial Trade and Horizontal FDI: A Unified Model

On the basis of previous research literature, this paper constructs a unified general equilibrium model of intra-industrial trade which can endogenize horizontal foreign direct investment (FDI) by introducing the horizontal multinational enterprises (MNEs) into the model of the new trade theory to illuminate the rationale for coexistence of intra-industrial trade and horizontal FDI between developed countries from the perspective of the theory. Based on the analysis of general equilibrium and its inframarginal comparative statics of local equilibrium structures of the model, this paper deeply analyzes such theoretical problems as the choice on the specific mode of openness made by north developed countries while opening to each other and the relationship between intra-industrial trade and horizontal FDI of north developed countries.