Spillover Effects of the Opioid Epidemic on Consumer Finance

Western Finance Association Annual Meeting Paper, 2019

40 Pages Posted: 4 Feb 2019 Last revised: 8 Nov 2019

See all articles by Mark Jansen

Mark Jansen

University of Utah - Department of Finance

Date Written: November 6, 2019

Abstract

Appendix available at https://ssrn.com/abstract=3324720.

I examine the impact of the opioid epidemic on subprime auto lending. Using a difference-in-differences framework, I find that county-level increases in opioid abuse cause an increase in loan defaults. Moreover, I find that traditional credit scoring attributes (e.g., FICO score) fail to predict loan performance deterioration associated with opioid addiction. The resulting higher default rates and weaker predictive performance of traditional credit measures generate a negative externality for borrowers in opioid-afflicted areas, as evidenced by 4.4% higher loan costs for subprime borrowers.

Keywords: opioid crisis, marijuana, subprime, auto lending, household finance

JEL Classification: D14, D82, G29, I15

Suggested Citation

Jansen, Mark, Spillover Effects of the Opioid Epidemic on Consumer Finance (November 6, 2019). Western Finance Association Annual Meeting Paper, 2019. Available at SSRN: https://ssrn.com/abstract=3324709 or http://dx.doi.org/10.2139/ssrn.3324709

Mark Jansen (Contact Author)

University of Utah - Department of Finance ( email )

David Eccles School of Business
Salt Lake City, UT 84112
United States
801-213-6910 (Phone)

HOME PAGE: http://eccles.utah.edu/team/mark-jansen/

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