Do you have one of the ball bands? I'd look to see what they recommend (hand washing? machine washing? laying flat to dry? drying in the dryer?).
I would go ahead and wash it even though cotton doesn't generally shrink that much. But it may have contracted some dust and fuzz in its creation, so it wouldn't hurt to wash and dry it per the original instructions.
If you don't have a ball band, you might look the yarn up online to find the washing/drying instructions. Or give us the name here; someone's bound to have used that kind of yarn before and can give you some direction.