John Bartlow Martin who was President Johnson's special envoy to the Dominican Republic, and Jean Shepherd, New York City radio commentator of the "night people," were honored yesterday as outstanding Hoosier authors. Four others received special citations for distinguished writing at the annual Indiana Author's Day luncheon at Indiana University Seven received honorable mention. All were recognized for books published in 1966. The winners, by categories, and their books were: Fiction - Jean Shepherd, New York City, "In God We Trust, All Others Pay Cash (Doubleday). Nonfiction, international affairs - John Bartlow Martin, Chicago, "Overtaken by Events" (Doubleday) Fiction, young adults - Gertrude E. Finney, Spokane, Wash., "To Survive We Must Be Clever" (David McKay). Children's literature - Bill Peet, Los Angeles, "Capyboppy" (Houghton-Mifflin). Nonfiction, Indiana Sesquicentennial - Dale W. Burgess, Indianapolis, "Just Us Hoosiers." Special Award - William E. Wilson, Bloomington, in recognition of continuous contribution of distinguished quality to the literature of and about Indiana. HONORABLE mentions were given in the fo1lowing categories: Fiction - Esther Kellner of Richmond, ''Cry to the Hills" (Doubleday); William Gass, Lafayette, "Omensetter's Luck" (New American Library). International Affairs - Bernard S. Morris, Bloomington, "International Communism and American Policy" (Atherton Press). Biography - Rachel Peden, Bloomington, "The Land, The People" (Knopf).