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] [slides]

This paper outlines a theoretical framework for examining how contractual frictions interact with the amount of risk people choose to bear and applies it to study preventive healthcare allocations. I document that DPT vaccination 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. Contrasting the consumption neutrality of the efficient risk choice with the history dependence that contracts exhibit when weakly enforced, I devise a test to show that the hypothesis of limited commitment cannot be rejected in the data. 


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

Tax policy is volatile and largely dependent on the political regime in power. In this paper, I ask if labor regulations can be used to promote fiscal uniformity. I document that countries with more disproportional electoral voting systems are supported with higher minimum wages. To account for this fact, I develop a model in which a benevolent constitutional planner can restrict the allocation space of a heterogeneously skilled population prior to the stochastic determination of fiscal policy. 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. 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]

Traditional models of money assume that the marginal social cost of printing fiat currency is zero, justifying the optimality of the Friedman rule. However, in an environment where the degree of hidden income is alleviated by the dearth of cash, demonetization could be efficient. To implement this policy, the Reserve Bank of India (RBI) imposed non-discriminatory transfer limits, which I argue are too blunt to insure against idiosyncratic income risk. I propose a set of instruments that provide a better hedge against such shocks--transfer limits dependent on reported household income. I isolate conditions under which optimal state-contingent transfer limits are monotonic in endowments and promised values. This framework successfully predicts the heterogeneous response of households to demonetization. A model disciplined by the distributions of wealth, income and consumption expenditure in India reveals that long-run gains in the surplus of the central bank upon switching to a state-contingent monetary policy from a non state-contingent one are 28.5% of aggregate income. 

Are Minimum Wages and Income Taxes Complements or Substitutes? with Sergio Salgado (First Draft)

In this paper, we document that minimum wages and income taxes are positively correlated in some U.S. states, and negatively correlated in others. This fact cannot be explained by Ramsey outcomes under complete information. However, the optimal public policy under asymmetric information can rationalize this fact. In particular, we show that the optimal minimum wage and the optimal income tax are complements in a frictionless economy. When workers privately observe their productivity, in contrast, we find that the two redistributive tools can be substitutes under plausible restrictions on the government's auditing technology.

IN PROGRESS

A Positive Theory of Collateral Constraints under Time-inconsistent Taxation

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.