Optimal subsidy for the poor

This paper considers the problem of allocating an antipoverty budget (subsidy) among the poor in a society in an optimal and inequality reducing manner. Optimality requires minimization of some exogenously given poverty index. On the other hand, for inequality reduction, a poorer poor should receive a higher amount of subsidy than a richer poor (minimal progressivity) and the ranks of the persons in the pre- and post-subsidized distributions should be the same. An illustration of the general optimal subsidy function using some specific poverty index and an income distribution is provided.