The Impact of Institutional Openness Policies on Firms' Total Factor Productivity

Ying Wang, Pengkai Ma and Xin Wang

Review of Development Economics, 2026, vol. 30, issue 3, 1801-1817

Abstract: Under the background of the full implementation of institutional openness in China in recent years, this study examines the relationship between institutional openness and total factor productivity (TFP). Based on the differences in the degree of institutional openness generated by China's pilot policies in 2016, and using corporate financial data and the difference‐in‐differences (DID) method, we found that institutional openness had a positive impact on firms' TFP. Four possible influence mechanisms are found, which are the improvement of enterprise innovation, the increase of outward foreign direct investment (OFDI), the increase of government subsidies, and the improvement of ESG level.

Date: 2026
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