# Standardized dependent variable within a group in panel data models?

Does standardizing of a dependent variable within the identifying group make sense?

The following working paper (Deforestation slowdown in the Legal Amazon; Prices or Policies?, pdf) uses a standardized dependent variable to analyze the effect of general policy change in Brazil on deforestation.

Standardization is done as as follows:
$$Y^{new}_{it} = \frac{Y_{it} - \overline{Y_i}}{sd(Y_{it})}$$

The authors argue, this serves to "consider relative variations in deforestation increments within municipalities". The authors use hereby a FE estimation (page 12) for panel data. Including a Post-policy-dummy for each following year after the a new law.

• How should coefficients be interpreted if the dependent variable was standardized in this way?
• Is standardization not unorthodox as it gives higher values to observations where the group/municipality experienced lower variations over time?