Youth Labour Market Dynamics, Human Capital, and Economic Growth: An Endogenous Growth Model

Abstract This paper builds on endogenous growth and integrates youth labour market dynamics into the analysis of long-run economic growth. Youth Labour and physical capital are the two factors of production used in this paper, where youth total labour is divided into employed labour, youth in education or training, and unemployed youth to ex amine how human capital accumulation and labour market allocation interact to influence growth. Human capital accumulates through ed ucational participation but depreciates due to skill loss from unem ployment of unemployed youth. The model introduces the Absorp tion Rate (AR), which is a measure of human capital–employment efficiency that captures the extent to which human capital accumu lated is translated into productive employment. The findings of the model indicate that long-run growth depends not only on human cap ital accumulation but also on the sensitivity of how human capital is absorbed into productive employment, emphasizing the role of human capital-employment efficiency in long-run economic growth. JEL Classification: O41; J21; J24; O15