Economic Effects of Free Trade Zones based on Panel Data and Synthetic Control Methods

Abstract

To analyze the impact of the establishment of FTZs on economic growth, the study quantitatively evaluates the economic effects of FTZs through the synthetic control method, taking Fujian FTZs as the unit of policy intervention, and combining the panel data with the placebo test method. The mechanism of economic growth effect of the establishment of FTZ is analyzed through the mechanism of mediating effect. The results show that the estimation results of the research method are better and more robust. The difference between the true and composite values of the control variable is relatively small, with the true and composite values of openness being 15.9226 and 15.4561, respectively, with a difference of 0.4665. In 2015, the difference in GDP between Fujian Province and synthetic Fujian Province reached 0.1, and the difference has significantly increased thereafter. After adding control variables, the trend of this difference over the years is consistent with that before adding control variables, i.e., the establishment of FTZ in Fujian Province can significantly promote economic growth. There is a 1/26 probability that other provinces and cities can obtain the same policy effect as Fujian Province. Compared to other synthesized results, the maximum root mean square error ratio in Fujian Province is 6.0, which is 2.8 higher than that in Jiangsu Province, indicating the maximum processing effect. Among them, the root-mean-square error ratios of Shandong Province and Chongqing Municipality are 2.2 and 2.3, respectively, while the root-mean-square error ratio of Fujian Province is 6.0. The research method can effectively analyze the economic effects of FTZ in Fujian Province and deepen the comprehensive understanding of the economic effects of FTZ.