Effects and Mechanisms of China’s Pilot Free Trade Zones on Green and High-Quality Development from the Dual-Circulation Perspective

Under the dual pressure of economic growth and environmental pressure, green and high-quality development become a critical strategy for China to achieve win-win development for both the economy and the environment. In the dual-circulation pattern, a deep and high level of openness is the primary prerequisite for encouraging green and high-quality development. Previous studies have overlooked the crucial pivotal role of pilot free trade zones (PFTZs) in domestic and international circulation. The PFTZ is essential in driving China’s green modernization and high-quality development as a crucial area of opening up. This paper utilizes the propensity score matching and difference-in-differences (PSM-DID) on panel data from 27 provinces from 2007 to 2020 to investigate the green policy effects of PFTZ building and its underlying mechanism. The results show that (1) the establishment of PFTZs significantly enhances regional green and high-quality development, with a net policy impact of roughly 4%. The several robustness tests demonstrate that the outcomes are extremely reliable; (2) According to the heterogeneity analysis, compared with inland areas, coastal locations may more effectively foster green and high-quality development; and (3) The influencing mechanism test results show that PFTZs primarily have a positive impact on technological progress, scale expansion, and innovation-driven effects, which, in turn, support green and high-quality development. The mediating effect of innovation-driven and technological progress is extremely significant among them. These research findings can provide empirical support and policy rationale for PFTZs to better promote China’s green and high-quality development.