Development economists model poverty traps as a threshold: below a certain capital level a household can't invest its way out, but above it growth compounds.
capital(t+1) = capital(t)*(1+investment) if market_access
escape poverty when capital > threshold
- Households — household agents each holding a small stock of capital.
- Market access nodes — market/credit access points households need to reach to invest productively.
- Investment rate — share of income a household reinvests rather than consumes.
- Growth momentum — how strongly compounding capital growth accelerates once a household is above threshold.
This is the mechanism behind real poverty-trap economics — without market access, even a high savings rate can't compound fast enough to escape subsistence.