Opioid Crisis Effects On Municipal Finance
70 Pages Posted: 12 Sep 2019 Last revised: 26 Mar 2020
Date Written: March 21, 2020
We use full-population data at the individual death certificate, prescribed opioid pill, and individual municipal bond level to investigate the effects of the opioid crisis on local governments. The opioid epidemic lowers credit ratings and increases new offer yields among the most affected counties. More importantly, higher opioid death rates reduce new issuance of municipal bonds. We exploit both the distribution channel and type of opioid prescribed to form an instrumental variable to identify these effects on capital market access, and show that Prescription Drug Monitoring Programs (PDMPs) partially reverse these effects using state border-discontinuity difference-in-differences identification.
Keywords: Access to Finance, Credit Ratings, Municipal Bonds, Opioid, Pill Mill, Prescription Drug Monitoring Program
JEL Classification: G12, G14, G18, G24, H72, H74, H75, I15
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