Income Versus Demand: Exploring Dynamics of Poverty Lines Using Agent-Based Modeling

More than 650 million people are living in poverty around the world. Drawing on nonlinearities in empirical observations of poverty, this paper introduces an agent-based model to examine the complex demand behavior of households in the market in order to establish an initial experimental platform for advanced investigations into foundations that drive or mitigate economic growth (and by implication poverty). Exploring the model across 6800 scenarios we could reconstruct the nonlinearity linkage between income levels and price levels (which can lead to increased inflation and poverty). Instead, demand tends to follow an S-shaped growth pattern, especially in lower-income conditions in which needs potentially remain unsatisfied. These observations were reconciled with empirical data, suggesting that the model offers fundamental analytical value, before concluding with the discussion of future extensions (e.g., supply side, state actors, foreign investments) to more closely capture economic complexity found in the real world, and hence expand the analytical value of the model.