OPTIMAL REGIONAL INTERSECTORAL FISCAL POLICY.

This paper is based on the premise that different government expenditure programs generate different income distributions across regions as well as different total incomes. The nature of this trade-off is examined in the context of a linear (input-output) interregional model of the economy, using programming techniques. In particular, it is shown that each government expenditure program has 'income-increasing' and 'income-equalizing' components. 'Equity-efficient' program mixes are characterized as programs on the convex closure of the set of programs, represented in terms of their 'income-increasing' and 'income-equalizing' components. The number of programs in an 'equity-efficient' program mix is equal (at most) to the number of regions.