Opioid Crisis Effects On Municipal Finance

70 Pages Posted: 12 Sep 2019 Last revised: 26 Mar 2020

See all articles by Kimberly Rodgers Cornaggia

Kimberly Rodgers Cornaggia

Pennsylvania State University - Department of Finance

John Hund

University of Georgia

Giang Nguyen

Pennsylvania State University - Smeal College of Business

Zihan Ye

Pennsylvania State University - Department of Finance

Date Written: March 21, 2020

Abstract

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

Suggested Citation

Cornaggia, Kimberly Rodgers and Hund, John and Nguyen, Giang and Ye, Zihan, Opioid Crisis Effects On Municipal Finance (March 21, 2020). Available at SSRN: https://ssrn.com/abstract=3448082 or http://dx.doi.org/10.2139/ssrn.3448082

Kimberly Rodgers Cornaggia (Contact Author)

Pennsylvania State University - Department of Finance ( email )

306 Business Bldg
University Park, PA 16802
United States
814-865-2243 (Phone)
814-865-3362 (Fax)

HOME PAGE: http://directory.smeal.psu.edu/kjr15

John Hund

University of Georgia ( email )

Athens, GA 30602
United States

Giang Nguyen

Pennsylvania State University - Smeal College of Business ( email )

University Park, PA 16802
United States

HOME PAGE: http://directory.smeal.psu.edu/gxn13

Zihan Ye

Pennsylvania State University - Department of Finance ( email )

University Park, PA 16802
United States

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