SHIV DIXIT

I am an Assistant Professor of Economics and Public Policy at the Indian School of Business. I received my Ph.D. in Economics from the University of Minnesota. Previously, I served as a Research Analyst at the Federal Reserve Bank of Minneapolis and the International Monetary Fund.

Fields: Public Finance, Monetary Economics, Macroeconomics

WORKING PAPERS

Contract Enforcement and Preventive Healthcare: Theory and Evidence

I study how enforcement frictions in health insurance contracts determine the distribution of preventive care. I document that immunization rates are lower in countries with weaker contract enforcement, and exhibit steady state traps. These patterns cannot be explained by efficient immunization in a frictionless economy. However, dynamic contracts subject to ex-post one-sided commitment can rationalize these facts. When contracts are weakly enforced, insurers underinvest in preventive care to perpetuate the need for insurance. This mechanism is self-enforcing, whereby low levels of prevention today breed low levels of prevention in the future. Leveraging this history dependence, I devise a test to show that the hypothesis of limited commitment cannot be rejected in the data. I also structurally estimate the model to match the distribution of immunization rates and show that the model predicts non-targeted moments relating to the persistence of immunization.

Electoral Systems, Fiscal Policies and Labor Regulations

This paper provides a unified explanation of the effect of electoral rules on fiscal policies and labor regulations. Empirical evidence suggests that disproportional electoral voting systems are associated with smaller governments and higher minimum wages. To account for these facts, I develop a model in which a benevolent constitutional planner can restrict the labor allocation space of a heterogeneously skilled population prior to the stochastic determination of fiscal policies. Elected officials maximize the objective of their constituencies by devising socially suboptimal tax systems that favor idiosyncratic gains from redistribution. I show that the equilibrium constitution imposes higher minimum wages ex-ante to reduce taxation ex-post in more disproportional electoral systems. I structurally estimate the model using key moments of the U.S. presidential elections and the Lorenz curve. I find that labor regulations aimed at disciplining taxation can increase welfare by 2.5% in terms of certainty equivalent consumption.

The Distributional Impact of Transfer Limits During India’s Demonetization

What were the distributional consequences of the recent demonetization in India? Can the implementation of demonetization be improved to mitigate its distributional impact? This paper answers these questions using a dynamic contracting model featuring costly state verification and transfer limits. I document substantial heterogeneity in the impact of demonetization on consumption expenditure across income and wealth distributions. This finding suggests that the non-discriminatory transfer limits implemented during demonetization were too blunt to insure against idiosyncratic income risk. I show that sharper monetary policy instruments contingent on the history of reported household income can yield substantial welfare gains.


IN PROGRESS

Are Minimum Wages and Income Taxes Complements or Substitutes? with Sergio Salgado

Bank Coordination and Monetary Transmission: Evidence from India with Krishnamurthy Subramanian

Health Insurance and Precautionary Savings: The Role of Financial Market Incompleteness with Radhakrishnan Gopalan

Impact of the GST on Corporate Tax Evasion: Evidence from Indian Tax Records with Sumit Agarwal, Shashwat Alok, and Tejaswi Velayudhan


PUBLICATIONS

BOOK CHAPTERS

East African Community: Taking Off? with Martine Guerguil, Catherine McAuliffe, Hamid Davoodi, and Maxwell Opoku-Afari, Regional Economic Outlook: Sub-Saharan Africa, International Monetary Fund, April 2011, 51-73.

The Quest for Regional Integration in the East African Community, Chapter 7, edited by Paulo Drummond, S. Kal Wajid and Oral Williams, International Monetary Fund, Washington D.C., 2014.

POLICY PAPERS AND STAFF REPORTS

Botswana: Article IV Consultation with Lamin Leigh, Gonzalo Pastor and Gustavo Ramirez, International Monetary Fund, 2011.

Tracking Short-term Dynamics of Economic Activity in Low-income Countries in the Absence of High-frequency GDP Data with Maxwell Opoku-Afari, Working Paper Series, International Monetary Fund, Washington D.C., 2012, WP/12/119.

Impact of the Global Financial Crisis on Exchange Rates and Policies in Sub-Saharan Africa with Nabil Ben Ltaifa and Stella Kaendera, African Departmental Paper, International Monetary Fund, 2009, AFR/09/03.

Monetary Transmission Mechanism in the East African Community: An Empirical Investigation with Hamid Davoodi and Gabor Pinter, Working Paper Series, International Monetary Fund, Washington D.C., 2013, WP/13/39.


DISCUSSIONS

"Heterogeneity of Central Bankers and Inflationary Pressure" by Mauricio Bugarin and Fabia Carvalho; XX Inflation Targeting Conference, Central Bank of Brazil. [slides]

"Misallocation in the Market for Inputs: Enforcement and the Organization of Production" by Johannes Boehm and Ezra Oberfield; CAFRAL, Reserve Bank of India. [slides]