Impact of External Tariff Modifications on Regional Investment in China-- An Examination of the Correlation Between External Tariffs and Regional Investment Utilizing a Longitudinal Difference-in-Differences Model at the Prefecture Level

This study uses prefecture-level data to construct a long-term difference-in-differences model to empirically analyze the impact of external tariff modifications on regional foreign direct investment (FDI) in China. The research explores how tariff changes influence FDI inflows via wage levels in the tradable sector and regional investment conditions, adjusting for various economic factors. Results show that tariff reductions significantly boost FDI inflows, particularly in the tradable sector. Mechanism analysis highlights the labor market's role in FDI flows, as tariff changes affect production costs and wages, indirectly influencing foreign capital inflows. This study provides insights for effective tariff policy development in the globalized context.