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Although the Chinese government has promulgated a series of policies to mitigate air pollution, the air quality in a number of Chinese cities still has the potential to be improved. As the major source of air pollution, enterprises in the industrial and energy sectors are the most difficult to regulate in terms of polluting emissions. This paper aims to investigate what factors influence the intensity of environmental regulations on polluting enterprises based on environmental regulation theory and an empirical test. Firstly, this article builds a theoretic model of optimal regulation supply for local governments in order to examine the relationship between factors influencing the intensity of environmental regulation. Secondly, we use provincial panel data from 2008 to 2015 to test the theoretical hypothesis and use the generalized method of moments (GMM), the two-stage least squares (2SLS) method to address the endogeneity issue. The main finding of the study is that, in regions with a high concentration of polluting enterprises, not only is there more air pollution than in other regions, but the local governments might show partiality towards the polluting enterprises, which could impede the implementation of environmental regulation.

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