Can Institutional Openness Boost China’s Urban Economic Resilience? Evidence from Pilot Free Trade Zones

Economic resilience represents a nation’s capacity to withstand external shocks, quicken economic recovery, and attain sustainable development. Can Pilot Free Trade Zones (PFTZs), as testing fields for China’s institutional openness, boost the economic resilience of host cities? This study empirically investigates the impact and mechanisms of establishing PFTZs on urban economic resilience. It does so by building overlapping Difference-in-Differences (DID), Propensity Score Matching DID (PSM-DID), and spatial DID models using panel data across 284 cities in China from 2007 to 2021. It is found that establishing PFTZs significantly promotes urban economic resilience, and PFTZs largely achieve this by increasing population density, consumer demand, and economic growth in host cities. Spatial heterogeneity analysis reveals that PFTZs in North, East, Central, and South China notably enhance urban economic resilience, whereas those in Northeast, Southwest, and Northwest China do not. Regarding spatial spillover effects, the establishment of PFTZs has a beneficial impact on the economic resilience of nearby cities within a radius of 100 km to 400 km. The impacts become stronger as the distance grows, peaking at a radius of 400 km. This research offers important policy implications for promoting the establishment of PFTZs, unlocking the benefits of institutional openness, and strengthening urban economic resilience.