Dixon has a wide scope in terms of the areas of economics he has researched and published in and he has been described as one of Europe's leading economists.[13] The topics include:
Bounded rationality. Dixon explored the implications of evolutionary ideas for oligopoly theory and learning.[22] He also developed one of the first models of
endogenous aspirations in economics.[23]
New Keynesian Macreconomics. Dixon was one of the first economists to examine the effect of
imperfect competition on the effectiveness of fiscal policy in his paper A simple model of imperfect competition with Walrasian features.[24] This is an idea that was much explored in many other papers by him [25] and more recently.[26] This paper was the first to demonstrate in a simple
general equilibrium model that the
fiscal multiplier could be increasing with the degree of
imperfect competition in the output market. The reason for this is that
imperfect competition in the output market tends to reduce the
real wage, leading to the household substituting away from
consumption towards
leisure. When
government spending is increased, the corresponding increase in
lump-sum taxation causes both leisure and consumption decrease (assuming that they are both a normal good). The greater the degree of imperfect competition in the output market, the lower the
real wage and hence the more the reduction falls on leisure (i.e. households work more) and less on consumption. Hence the
fiscal multiplier is less than one, but increasing in the degree of imperfect competition in the output market.
^A simple model of imperfect competition with Walrasian features, Oxford Economic Papers, 1987, 39, 134–160
^Imperfect competition and macroeconomics: a survey" Huw Dixon and Neil Rankin, Oxford Economic Papers, 1994, 46, 171–199
^Luís F. Costa and Huw David Dixon (2011) Fiscal Policy under Imperfect Competition with Flexible Prices: An Overview and Survey. Economics: The Open-Access, Open-Assessment E-Journal, Vol. 5, 2011–3