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Can Pilot Free Trade Zones Improve Local Governance Quality? Evidence from a Quasi-Natural Experiment in China

Published online by Cambridge University Press:  12 November 2025

Xiu-qun Ye ,
Qin Guo ,
Changjin Liu ,
Miraj Ahmed Bhuiyan Open the ORCID record for Miraj Ahmed Bhuiyan [Opens in a new window]  and
Da Wang
Xiu-qun Ye
Affiliation:
School of Business, Jiangxi Normal University, Nanchang, China
Qin Guo
Affiliation:
School of Business, Jiangxi Normal University, Nanchang, China
Changjin Liu
Affiliation:
School of Economics and Management, Nanchang Hangkong University, Nanchang, China
Miraj Ahmed Bhuiyan*
Affiliation:
School of Economics, Guangdong University of Finance and Economics, Guangzhou, China
Da Wang
Affiliation:
Jiangxi Academy of Social Sciences, Nanchang, China
*
Corresponding author: Miraj Ahmed Bhuiyan; Email: ahmed.miraz@qq.com
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Abstract

The purpose of this study is to reveal the impact of pilot free trade zones (PFTZs) on local governance quality (LGQ) to provide a reference for driving governance reforms in China. Based on provincial panel data from 2004 to 2020 in China, the impact of the establishment of PFTZs on LGQ is analyzed by employing the multi-period difference-in-difference (DID) method. The results show that the establishment of PFTZs can significantly enhance the governance quality of local governments, but there is heterogeneity in location and establishment batches. PFTZs improve LGQ through the effects of institutional spillover, factor allocation, and talent agglomeration. FDI spillover can partially substitute for promoting the effect of PFTZs on LGQ, and economic growth pressures can distort the positive effect of PFTZs on LGQ. Therefore, policymakers should clarify the functional positioning of PFTZs and leverage their effects, which are institutional spillover, factor allocation, and high-end factor agglomeration, to enhance LGQ.

Keywords

Pilot free trade zonelocal governance qualityinstitutional spilloverFDI spillovereconomic growth pressure

Information

Type
Original Article
Information
World Trade Review , First View , pp. 1 - 20
Copyright
© The Author(s), 2025. Published by Cambridge University Press on behalf of The Secretariat of the World Trade Organization.

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