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
[paper] [supplementary appendix]

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, Heterogeneous Fiscal Policy and Labor Regulations
[paper] [slides]

This paper studies the effect of electoral systems on fiscal policies and labor regulations. Fiscal policies are largely dependent on the political regime in power. As a result, they tend to be more volatile in majoritarian voting systems. I argue that labor regulations can be used to promote fiscal uniformity in such systems. In particular, I develop a model in which a benevolent constitutional planner can restrict the allocation space of a heterogeneously skilled population prior to the 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 limits cross-sectional dispersion in labor income ex-ante to discipline taxation ex-post. Consistent with the data, this framework predicts that more disproportional electoral voting systems are associated with smaller governments and higher minimum wages. A model estimated using key moments of the U.S. presidential elections and the Lorenz curve reveals that labor regulations aimed at stemming erratic taxation can increase welfare by 2.5% in terms of certainty equivalent consumption. 


Efficient Demonetization
[paper] [SSRN]

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 cash-in-advance constraints. Using an instrumental variables strategy, 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 propose sharper monetary policy instruments contingent on the history of reported household income to facilitate static and dynamic consumption smoothing. I isolate the conditions under which optimal state-contingent transfer limits are weakly decreasing in income and strictly increasing in wealth. A model calibrated to Indian data reveals that switching to a state-contingent monetary policy produces long-run gains in central bank surplus equal to 28.5% of aggregate income. 


IN PROGRESS

A Positive Theory of Collateral Constraints under Time-inconsistent Taxation

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

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


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.

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