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Studies on the impacts of pilot free trade zones (FTZs) on green development performance remain limited. This paper uses China’s FTZ pilot policy as a quasi-experiment and employs a staggered difference-in-difference model to examine its effect on green total-factor productivity (TFP) using city-level data from 2006 to 2019. The results show that the pilot FTZs lead to a 4.92% increase in green TFP for treated cities. However, mechanism analyses reveal that the scale effect is the key channel. More importantly, economic scale growth is accompanied by increased energy consumption and carbon emissions, especially in cities with weaker environmental regulations. Therefore, the improvement in green TFP induced by FTZs comes with significant environmental costs. This study also documents the economic agglomeration effects of pilot FTZs, noting a pronounced siphoning effect on nearby cities within a 100-km radius of the pilots. Finally, the cost-benefit analysis estimates a net benefit of 46.82 billion CNY per city as of 2019. These findings offer crucial evidence of the multifaceted impacts of FTZs, informing policy adjustments for enhanced green development in relevant countries.
Yang et al. (Wed,) studied this question.