Are you allowed to use the spell
Shrink Item on a living creature?
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Shrink Item is specifically designed for an object, for which creatures do not qualify. You're wanting either Reduce Person or Reduce Creature.
Edit: Or Reduce Animal, as the case might be. http://www.wizards.com/default.asp?x=dnd/lists/spells&tablefilter=reduce
The spell specifically mentions a non-living object so no....but you COULD kill them and shrink their body (if you needed to hide a corpse somewhere but with a lack of space).