Optimal Distribution of Provincial Budget Resources Based on Optimal Control Theory

The main goal of this study is to provide a model for optimal allocation of provincial budget resources with attention to provinces priorities and with the aim of financial and county spatial decentralization and also social welfare maximization. For this purpose, we design an optimal control problem and then, we calculate long run equilibrium of this model with focusing of macroeconomic indicators include the mortality rate, unemployment rate, GINI coefficient, literacy rate, economic participation rate, the province proportion of domestic production and the province proportion of industrial, services and agricultural value added and weighted index of educational and health facilities .Also the short run dynamics of optimal solution has analyzed. Based on the results and according to the long run equilibrium of the optimal control model, if budget planer gives equal importance to these indicators, the higher budgets proportion will allocate to less developed provinces that it is contradict to current method of provincial budgeting in Iran. The results also show that any change in budget planner priority change long run equilibrium of the optimal control problem and composition of optimal provincial budget allocation.