Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/215268 
Year of Publication: 
2019
Series/Report no.: 
IZA Discussion Papers No. 12872
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
We investigate the effect of variations in the price of opium in Afghanistan on per capita dispensation of prescription opioids in the US. Quarterly county-level data for 2003-2016 indicate that reductions in opium prices significantly increase the quantity of opioids prescribed. The increase involves natural and semi-synthetic but not fully synthetics opioids, therefore suggesting that the effect is moderated by the amount of opium contained in the products. While this evidence could suggest a pass-through of lower production costs to retail prices, boosting patients' demand for opioids, we fail to detect significant effects of changes in retail prices on per capita dispensation. Moreover, firm-level analysis reveals that advertising expenses of opioid producers increase following opium price declines and so do their stock prices and profits. Overall, our findings suggest that supply-side economic incentives might have played an important role in the opioid epidemic.
Subjects: 
prescription opioids
drugs
opium price
supply-side economic incentives
JEL: 
I11
I12
I18
L65
Document Type: 
Working Paper

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