Opioid Epidemic and Local Fiscal Choices: Causal Evidence From Hydrocodone Rescheduling

Felipe Lozano‐Rojas and Mikhail Ivonchyk

Public Budgeting & Finance, 2025, vol. 45, issue 2, 45-64

Abstract: The opioid epidemic has garnered attention from scholars across disciplines, yet its effect on local finances remains uncertain. We exploit an exogenous shock in hydrocodone supply, a commonly abused opioid, to estimate the causal effect of opioid exposure on local finances. Our results reveal larger budgets in affected communities, driven primarily by increased healthcare spending, along with higher intergovernmental aid and property taxes, while other revenue sources remain largely unchanged. These findings indicate that the epidemic burdens local budgets and suggest that addressing root causes, such as legal opioid supply, may not fully mitigate financial impacts.

Date: 2025
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https://doi.org/10.1111/pbaf.12385

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