Opioid Crisis Effects on Municipal Finance

We investigate the effects of opioid abuse on municipal finance. We employ instrumental variables, border discontinuity difference-in-differences regressions, and coarsened exact matching to identify consistent causal effects, while controlling for variation in economic conditions and demographics. Opioid abuse lowers credit ratings, increases new offer yields, and reduces bond issuance. Reversal of these effects following effective antiopioid legislation further supports causality. Differential effects due to investor heterogeneity suggest that opioid abuse affects municipal finance through a capital supply channel. Overall, we conclude that local opioid abuse impedes municipalities' access to capital and thus hurts their ability to provide public services and infrastructure.

This is a pre-copyedited, author-produced PDF of an article accepted for publication in The Review of Financial Studies following peer review. The version of record [Opioid Crisis Effects on Municipal Finance. The Review of Financial Studies 35, 4 p2019-2066 (2022)] is available online at: https://doi.org/10.1093/rfs/hhab066.

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Metadata

Work Title Opioid Crisis Effects on Municipal Finance
Access
Open Access
Creators
  1. Kimberly Cornaggia
  2. John Hund
  3. Giang Nguyen
  4. Zihan Ye
Keyword
  1. Access to Finance
  2. Municipal Bonds
  3. Opioid Epidemic
  4. Public Finance
License In Copyright (Rights Reserved)
Work Type Article
Publisher
  1. Review of Financial Studies
Publication Date June 22, 2021
Publisher Identifier (DOI)
  1. https://doi.org/10.1093/rfs/hhab066
Related URLs
Deposited August 04, 2022

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Version 1
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  • Added SSRN-id3448082.pdf
  • Added Creator Kimberly Cornaggia
  • Added Creator John Hund
  • Added Creator Giang Nguyen
  • Added Creator Zihan Ye
  • Published
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    • https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3448082
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    Related URLs
    • https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3448082
    • https://ssrn.com/abstract=3448082
  • Updated Work Title, Keyword, Description Show Changes
    Work Title
    • Opioid Crisis Effects on Municipal Finance
    • ! Opioid Crisis Effects on Municipal Finance
    Keyword
    • Access to Finance, Municipal Bonds, Opioid Epidemic, Public Finance
    Description
    • <p>We investigate the effects of opioid abuse on municipal finance. We employ instrumental variables, border discontinuity difference-in-differences regressions, and coarsened exact matching to identify consistent causal effects, while controlling for variation in economic conditions and demographics. Opioid abuse lowers credit ratings, increases new offer yields, and reduces bond issuance. Reversal of these effects following effective antiopioid legislation further supports causality. Differential effects due to investor heterogeneity suggest that opioid abuse affects municipal finance through a capital supply channel. Overall, we conclude that local opioid abuse impedes municipalities' access to capital and thus hurts their ability to provide public services and infrastructure. </p>
    • We investigate the effects of opioid abuse on municipal finance. We employ instrumental variables, border discontinuity difference-in-differences regressions, and coarsened exact matching to identify consistent causal effects, while controlling for variation in economic conditions and demographics. Opioid abuse lowers credit ratings, increases new offer yields, and reduces bond issuance. Reversal of these effects following effective antiopioid legislation further supports causality. Differential effects due to investor heterogeneity suggest that opioid abuse affects municipal finance through a capital supply channel. Overall, we conclude that local opioid abuse impedes municipalities' access to capital and thus hurts their ability to provide public services and infrastructure.
  • Updated Work Title Show Changes
    Work Title
    • ! Opioid Crisis Effects on Municipal Finance
    • Opioid Crisis Effects on Municipal Finance
  • Updated