Climate Finance and Youth NEET in Africa: Cross-Country Evidence from 46 Nations

Abstract

This paper examines whether climate finance contributes to reducing youth inactivity, measured by the share of young people not in education, employment, or training (NEET), across 46 African countries from 2011 to 2021. Drawing on Human Capital Theory, the study conceptualizes climate finance as an external investment that can expand capabilities, enhance skills, and strengthen labor-market inclusion when effectively absorbed by domestic institutions. Using panel data and the Driscoll-Kraay corrections as well as the Instrumental Variables Generalized Method of Moments (IV-GMM) techniques, the analysis finds a consistent and statistically significant negative association between total climate‑finance inflows and youth NEET rates. This relationship remains robust across multiple model specifications, extended socio‑economic controls, and heterogeneity tests. The findings suggest that climate finance functions not only as an environmental mechanism but also as a developmental tool, promoting youth engagement through human capital formation and skill development. Policy‑wise, aligning climate‑finance frameworks with national education, training, and employment systems can potentially transform external funds into effective catalysts for reducing NEET rates.