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 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 abnormal returns upon the passage of state laws intended to limit opioid prescriptions, especially for those firms that are more reliant on labor.

Keywords: opioid, firm value, labor supply