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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| Work Title | Opioid Crisis Effects on Municipal Finance |
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| License | In Copyright (Rights Reserved) |
| Work Type | Article |
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| Publication Date | June 22, 2021 |
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| Deposited | August 04, 2022 |
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