Abstract
This paper presents an analysis of government spending and optimal human investment allocation rate in the two sector model of an endogenous growth (education and good sectors), by comparing solutions between social planner maximization problem and decentralized competitive equilibrium, and by considering two types of utility functions: the Constant Inter-temporal Elasticity of Substitution (CIES) and the Constant Elasticity of Substitution (CES) with labor-leisure choice. The results show that the optimal rate of human investment allocation depends on the elasticity of inter-temporal substitution in which it describes insignificant changes when we use CIES or CES. Moreover, the optimal rate of human investment allocation both in social planner as well as decentralized competitive equilibrium are equivalent which suggest that Pareto optimum is prevailed
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