System dynamics is a methodology that examines the dynamics of internal structures and variable processes, providing critical support for long-term policy development. This study analyzed the dynamic interrelationship between the labor market and the economic development of Khovd aimag using system dynamics modeling. Indicators such as employment, population, migration, economic diversification, and infrastructure were assessed, and strategies including economic diversification, small and medium-sized business development, tourism, and human resource capacity enhancement were proposed. Implementing large-scale projects and attracting investment can positively impact the economy of Khovd aimag while significantly contributing to GDP, employment, and infrastructure development. The study’s results indicate that supporting economic diversification, increasing infrastructure investment, and activating the labor market can promote employment growth and ensure the sustainable development of the local economy.
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