Abstract

The discourse on labor engagement, underutilization, and unemployment has been a prominent focus in development literature, particularly in developing economies. These issues influence migration patterns and gross domestic output and, in some cases, contribute to youth restiveness. This study delves into the intricate relationship between investments in human capital, represented by spending on education and health, and its repercussions on youth employment outcomes in India. We gathered annual data spanning the years 1990 to 2021 from various Indian states. We employed the bootstrap-based bias correction for panel fixed effects estimation techniques to enhance the analytical accuracy. The findings of our investigation reveal that investments in human capital, encompassing both private and government health expenditures as well as expenditures on primary, secondary, and tertiary education, exert significant but varying impacts on youth employment in India. These results carry important policy implications. To effectively address the persistent challenge of youth unemployment in India, it is imperative to prioritize consistent and disproportionate investments in education over health. This shift in focus could prove instrumental in reversing the trend of youth unemployment and fostering sustainable economic growth.