Does the Construction of Free Trade Zones Promote the Development of the Digital Economy? Evidence from Chinese Prefecture-Level Cities

With the innovative development of new-generation information technology, the digital economy has become a new driving force for economic growth. However, whether the construction of free trade zones (FTZs), as the experimental field of a new round of reform and opening and the core area of institutional innovation, can promote the development of the digital economy (DE) remains unknown. This article takes the implementation of free trade zone pilot policies as a “quasi-natural experiment” based on panel data from 281 cities in China from 2011 to 2022. It uses the method of progressive difference-in-differences for empirical analysis to explore the impact of FTZs on the DE. The study shows that the construction of FTZs promotes the development of the DE, and this conclusion still holds after a series of robustness tests. The construction of FTZs promotes the development of the DE by facilitating industrial structure upgrading, increasing government attention to digital economy policies, and generating talent agglomeration effects. The impact of FTZ pilot policies on the DE varies depending on differences in intellectual property protection, innovation capabilities, whether the city is an old industrial base, and the level of traditional urban infrastructure. Further analysis indicates that from a microperspective, establishing FTZs still promotes the digital transformation of enterprises. This article provides essential policy insights for promoting the development of the DE in constructing FTZs.