The Employment Effect of China's Free Trade Zones: Evidence from Millions of Manufacturing Enterprises

This study investigates the impact of a natural experimentthe establishment of Chinas Free Trade Zones (FTZs)on employment in manufacturing enterprises. Using data from the China National Tax Survey (20102020) and employing a difference-in-differences method, we find that the establishment of FTZs has significantly promoted employment growth, especially for non-state-owned, younger and trading enterprises. Mechanism analysis reveals that the establishment of FTZs has substantially reduced corporate tax burdens and enhanced access to financing, thereby alleviating cash constraints. This has further promoted the increase in fixed asset investment. Additionally, FTZs have facilitated cost reduction and efficiency improvements. The institutional innovations embodied in China's FTZs offer valuable policy implications for other developing economies seeking to stabilize labor markets and stimulate economic growth.