Has the Construction of the Free Trade Zone Increased the Enterprise's Total Factor Productivity—Evidence from Generalized Synthetic Control

Chao Zhou

Applied Finance and Accounting, 2020, vol. 6, issue 2, 35-52

Abstract: The Free Trade Zone(FTZ) is a new policy for China to open wider to the outside world. Reducing trade barriers and promoting high-quality enterprise development is an important part of the construction of the FTZ. This article takes the construction of the FTZ based on From 2004 to 2018 as a quasi-natural experiment. The study found that- (1) The policy evaluation results show that after controlling the time and individual effects, the construction of the FTZ plays a significant role in promoting TFP. (2) The construction of the FTZ can promote the improvement of TFP through innovation-driven effects and resource allocation adjustment effects. The analysis shows that patents and the return on assets play an intermediary role between the FTZ and TFP. (3) After considering the time and industry effects, the construction of the FTZ has a significant impact on the TFP growth in state-owned enterprises; the general synthetic control method was used to investigate 11 FTZ, and the construction of Shanghai free trade zone has the most significant effect on the promotion of TFP. The main innovation of this article is the establishment of the FTZ has carried out a policy effect evaluation on the promotion effect of TFP, and has conducted a robustness test using the multi-phase DID method. It has a guiding significance for improving the construction of FTZ and promoting the improvement of enterprise TFP.

Date: 2020
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