Abstract: Recently, the dilemma between environmental protection and economic growth has caused widely concerns, it is urgent to explore the influence of environmental regulation intensity on economic growth. Prior research has mainly focused on the compliance cost theory and Porter hypothesis. Important issues that have long been ignored are the effect of environmental regulations on physical capital and human capital. However, their role in promoting sustainable growth and improving the level of residents' welfare cannot be neglected. Thus, the relationship between environmental regulation intensity and China's economic growth rate is studied in this paper from the perspective of physical capital and human capital. Based on the Overlapping Generation Model (OLG), environmental regulation, health human capital and physical capital are brought into an analytical framework. Theoretical analyses show that strict environmental regulations brought about both positive and negative influences to economic growth by reducing productive capital investment and promoting health human capital. When the intensity of environmental regulation is low, there is a positive correlation between environmental regulation intensity and economic growth, but excessive environmental regulation is negatively correlated with economic growth. On this basis, using data from China at the provincial level for the period 1997-2015, the inverted U-shaped relationship between environmental regulation intensity and economic growth is examined by GMM. It is suggested that the appropriate environmental regulations can improve the environmental quality standards without hurting the economy.

Key words: environmental regulation intensity, economic growth rate, OLG model, GMM, inverted U-shaped relationship