The Opioid Epidemic and Consumer Credit Supply: Evidence from Credit Cards

Sumit Agarwal, Wenli Li, Raluca Roman () and Nonna Sorokina ()
Additional contact information
Nonna Sorokina: https://scranton.psu.edu/person/nonna-sorokina-phd

No 23-28, Working Papers from Federal Reserve Bank of Philadelphia

Abstract: Using a unique data set of unsolicited credit card offer mailings by banks to consumers, we investigate how opioid abuse affects consumer credit supply in the U.S. To identify causal effects, we employ instrumental variables, propensity score matching, and contiguous counties techniques and control for varying local economic conditions and demographics. We find that banks contract credit supply to consumers in counties highly exposed to opioid abuse by offering higher interest rates, lower credit card limits, and fewer rewards and reducing credit offers overall. Further analyses using the supervisory Federal Reserve Y-14M credit card data set confirm these effects. What is more, the credit contraction disproportionately impacts riskier consumers, minorities (particularly Black people), low-income consumers, and younger individuals. Our examination of various state-level anti-opioid abuse legislation shows that opioid supply-oriented laws are somewhat helpful in curbing opioid overdoses or mitigating the credit supply contraction, but demand-oriented laws are not. Finally, we uncover the real effects associated with the opioid abuse-induced credit contraction: Local consumer spending significantly declines in the highly affected areas, with important macro-policy implications.

Keywords: Opioid Epidemic; Household Finance; Credit Supply; Spending; Risk (search for similar items in EconPapers)
JEL-codes: D10 D12 E58 G01 G28 (search for similar items in EconPapers)
Pages: 66
Date: 2023-11-28
New Economics Papers: this item is included in nep-ban, nep-pay and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.philadelphiafed.org/-/media/frbp/asset ... ers/2023/wp23-28.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedpwp:97380

Ordering information: This working paper can be ordered from

DOI: 10.21799/frbp.wp.2023.28

Access Statistics for this paper

More papers in Working Papers from Federal Reserve Bank of Philadelphia Contact information at EDIRC.
Bibliographic data for series maintained by Beth Paul ().