INVESTIGATE THE IMPACTS OF FISCAL POLICY ON HUMAN CAPITAL AND ECONOMIC GROWTH IN THE OPTIMAL CONTROL APPROACH
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This study examines the relationships between fiscal policy, human capital accumulation, and economic growth using a two-sector model adapted from the Uzawa-Lucas model. The model incorporates dual economic sectors, in which a social planner optimizes societal welfare through consumption, human capital, and economic growth. The results of the model simulation demonstrate that increased government spending in the education sector enhances both physical and human capital accumulation but has a neutral relationship with consumption. The analysis of the proportion of human capital H indicates that redistributing human capital between the production and education sectors affects consumption and physical capital accumulation but has minimal impact on human capital accumulation. These findings support the effectiveness of government spending as a tool for increasing human capital accumulation and suggest that policymakers should maintain or increase educational investments while implementing complementary measures to maintain consumption levels while pursuing educational investment.
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