The Impact of the Opioid Crisis on Firm Value and Investment
63 Pages Posted: 11 Mar 2019 Last revised: 20 May 2019
Date Written: February 19, 2019
The increasing rates of opioid abuse has had a signiﬁcant impact on the United States. This paper shows that the opioid epidemic has implications for ﬁrms which must now contend with a lower pool of available and productive workers. We show a negative relationship between opioid prescriptions and subsequent ﬁrm growth, after controlling for local economic and demographic conditions. We also show that ﬁrms invest in technology to substitute capital for labor and mitigate some of the costs due to the labor shortages. We establish a causal link between opioids and ﬁrm values using the staggered passage of state laws intended to limit opioid prescriptions. Following the passage of these laws, we ﬁnd a 20 basis point increase in the cumulative abnormal return of the average ﬁrm and a 50 basis point increase for ﬁrms that are less capital intensive pretreatment and thus have not invested in technology as a means to mitigate the negative eﬀects of opioids on the pool of available workers.
Keywords: opioid, technological change, firm value
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