The Impact of the Opioid Crisis on Firm Value and Investment

Abstract

The opioid crisis has implications for firms which must now contend with a lower supply of productive workers. Consistent with a labor shortage explanation, we find a negative effect of instrumented opioid prescriptions on subsequent individual employment. Similarly, we show a negative relationship between opioid prescriptions and subsequent establishment growth. Firms respond to the labor shortage by investing more in technology, consistent with an intent to substitute capital for the relatively scarcer labor. We find positive effects on firm valuations, especially for those that are less capital intensive, following the passage of state laws and regulations intended to limit opioid prescriptions.

Keywords: opioid, technological change, firm value