The Impact of the Opioid Crisis on Firm Value and Investment

Abstract

We show a negative effect of opioid prescriptions on subsequent individual employment among employers in our sample, using doctor opioid prescribing propensity as our instrument. This has implications for firms that must now contend with lower local labor supply. We find a negative relationship between opioid prescriptions and subsequent establishment growth. However, firms respond to the labor shortage by investing more in technology, replacing the relatively scarcer labor with capital, especially when they are not financially constrained. We find positive abnormal returns upon the passage of state laws intended to limit opioid prescriptions-driven by firms more reliant on labor.

Keywords: opioid, firm value, labor supply