Abstract: Based on the theory framework of Ramsey-Cass-Koopmans model, this paper constructs a two-sector economic growth model, including the environmental protection sector and the actual production sector, to analyze the relationship between environmental regulation and economic growth with the dynamic optimization theory. The result shows that there exists a relationship of multiple equilibrium between economic growth and environmental regulation. Then it makes use of China’s provincial pane1 data during 2007- 2012 to conduct an empirical analysis of the relationship between the two. The estimated result of the panel threshold regression model indicates that“Porter Hypothesis”has gained support from China’s evidences: the environmental regulation has promoted China’s economic growth. Further analysis proves that under the different intensities of environmental regulation, the impact of environmental regulation on economic growth is different.

Key words: environmental regulation; economic growth; multiple equilibrium