For the measurement of environmental regulation, various methods are employed in the existing literature, but, at present, the most popular one is to adopt the comprehensive index of environmental regulation intensity. This involves taking the emission intensity of the different pollutants of an industry as the measure of the stringency of environmental regulation. Nevertheless, this method has two likely issues. First, due to the inconsistency of the main pollutants across industries, the indicators of different pollutant discharges need a weighted average adjustment. Second, considering the different attributes and characteristics among industries, different industries need to make different degrees of effort to meet the same environmental requirements for emissions. In order to solve the two problems above, we refer to the method of Wang et al. [41 ]. In addition, to construct the comprehensive index of the intensity of environmental regulation, allowing for the availability of data on pollutant discharges, this study selects the rate of compliance for industrial wastewater discharge standards, the removal rate of industrial SO2, the removal rate of industrial soot, the removal rate of industrial dust, and the ratio of industrial solid waste utilized.
First, each individual indicator of pollutant discharge is standardized as follows:
where is the original value of the indicator for pollutant h; and represent the maximum and minimum values, respectively, of the indicator for pollutant h over the sample period; and is the standardized value of the indicator for pollutant h.
Second, we take a weighted average of the five indicators of pollutant discharge above. As the discharge of pollutants in different industries varies greatly, the weights are determined by:
where is the total industrial output, and denotes the weight. Equation (18) indicates that the weight of pollutant h in industry s is determined by the relative emission intensity of pollutant h. Thus, it is beneficial for eliminating the impact of pollution emission intensity differences between industries.
Third, we use the operating expenses of pollution control facilities per unit of output as the measure of the pollution treatment costs ( ) of industries to deal with the discrepancy in effort expended between industries with different pollution intensity aiming to meet the same emission standard. The weight of pollution control costs in each industry is given by:
Finally, the intensity of environmental regulation can be measured by:
where N represents the number of industries.
First, each individual indicator of pollutant discharge is standardized as follows:
where is the original value of the indicator for pollutant h; and represent the maximum and minimum values, respectively, of the indicator for pollutant h over the sample period; and is the standardized value of the indicator for pollutant h.
Second, we take a weighted average of the five indicators of pollutant discharge above. As the discharge of pollutants in different industries varies greatly, the weights are determined by:
where is the total industrial output, and denotes the weight. Equation (18) indicates that the weight of pollutant h in industry s is determined by the relative emission intensity of pollutant h. Thus, it is beneficial for eliminating the impact of pollution emission intensity differences between industries.
Third, we use the operating expenses of pollution control facilities per unit of output as the measure of the pollution treatment costs ( ) of industries to deal with the discrepancy in effort expended between industries with different pollution intensity aiming to meet the same emission standard. The weight of pollution control costs in each industry is given by:
Finally, the intensity of environmental regulation can be measured by:
where N represents the number of industries.
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