A Hybrid Simulation Approach to Modelling the Impact of Public Interventions on Poverty

Abstract

Purpose: The aim of the article is to present the concept of a hybrid simulation model to study the impact of public intervention on the level of poverty at the local, regional and national levels. Design/Methodology/Approach: The proposed model is the hybrid of two computer simulation methods Agent-Based Simulation (ABS) and System Dynamics (SD). Findings: Counteracting the phenomenon of poverty is one of the tasks of public administration units. Various tools and instruments can be used to fight poverty, as a part of numerous programs financed from public funds, but their implementation should be preceded by a thorough analysis of the effects arising after their application. This is not easy, because the phenomenon of poverty is very complex, it results from the arrangement of many interrelated elements, and the outcomes of actions are visible only after a longer period of time. This system is characterized by the heterogeneity of elements. Some of them are on a macro scale (e.g. GDP level, labour market), while others refer to the micro scale (e.g. households and their members). Building a model of households requires the use of a method that allows to reflect the behaviour and decision-making rules of individuals and the interaction between them in a disaggregated form. Agent-Based Simulation (ABS) is such a method. On the other hand, modelling elements occurring in the macro scale, where we usually deal with aggregate quantities, is best matched by System Dynamics (SD) simulation method, which allows for reflecting dynamic behaviour through feedback loops. Practical Implications: The proposed concept can be used both by public administration units at various levels as well as by scientists-to conduct socioeconomic research. Originality/Value: The applied simulation approach allows to capture the interrelations between the modelled effects in a dynamic manner for a long-time horizon, which is extremely important in the case of public management activities.