The impact of free trade zone policies on labor skill premiums: evidence from 278 Chinese cities

The policies of pilot free trade zones (FTZP) not only help promote economic development but also have a profound impact on labour wages. This article first calculates the level of labour skill premium using China’s urban data from 2010 to 2020, and then adopts the multiperiod difference-in-differences method (MPDID) to analyse the impact of FTZP on labour skill premium. This research reveals that, first, FTZP inhibits the level of labour skill premium. Second, the impact of FTZP on labour skill premium has significant differences in regional and urban characteristics. Specifically, FTZP inhibits the labour skill premium in cities in the western region, cities with low science and education levels, peripheral cities, and cities with a high degree of government support. Third, the mediating effect test shows that FTZP can affect the labour skill premium by promoting platform economy, the use of industrial robots, and enhancing urban entrepreneurial activity. Finally, based on the research findings, targeted countermeasures and suggestions are put forward to better narrow labour skill premium and promote common prosperity.