We　attempt　to　introduce　human　capital　externality　and　endogenous　laborleisure　decision　into　the　analytical　framework　constructed　by　Uzawa　(1965)　and　Lucas　(1988)　simultaneously,　so　as　to　explore　the　internal　relationship　among　endogenous　labor　supply,　human　capital　externality　and　sustainable　economic　growth　as　well　as　the　choice　problem　of　government＇s　education　policy.　The　main　conclusions　of　this　thesis　are　as　follows:　1.　The　sound　degree　of　household＇s　time　endowment　allocation　and　the　magnitude　of　human　capital　externality　will　work　on　the　height　of　the　steady　state＇s　growth　rate　on　the　balanced　growth　path.　2.　The　larger　the　subjective　time　preference　and　the　stronger　the　leisure　awareness　is,　the　lower　the　steady　state＇s　growth　rate　of　the　country　will　be;　the　larger　the　output　elasticity　and　education　investment　expenditure　elasticity　of　knowledge　spillover　becomes,　the　higher　the　steady　state＇s　growth　rate　of　the　country　will　be;　and　vice　versa.　3.　The　government　can　choose　from　carrying　out　lump-sum　output　taxation　or　education　subsidy　to　stimulate　the　adjustment　of　private　labor　supply　and　human　capital　investment,　such　that　the　decentralized　economy　could　be　induced　to　the　sustainable　optimal　growth　state.　We　employ　China＇s　province　level　panel　data　to　analyze　empirically,　all　the　main　conclusions　are　supported　by　the　empirical　research;　meanwhile,　we　also　observed　some　puzzles　which　are　different　from　the　existing　conclusions.