Born in Melbourne to Herbert Bishop Dixon and Margaret Vera Laybourne-Smith, Dixon attended Melbourne Grammar School and Monash University (BEc, 1967), Harvard (AM, PhD 1972) where he worked as teaching assistant from 1970 to 1972.
Dixon then worked from 1972 until 1974 for the International Monetary Fund in Washington and for the Reserve Bank of Australia in Sydney in 1974/75.
As a senior lecturer in the economics department and consultant to the Australian government's IMPACT project under Alan Powell until 1978, he started work on general equilibrium theory.
Powell and Dixon were the joint recipients of the 1983 Research Medal of the Royal Society of Victoria.
From 1991 until 2014 he served as director, later principal researcher, of the Centre of Policy Studies (CoPS) at Monash University.