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The Economics behind the Epidemic: Afghan Opium Price and Prescription Opioids in the US

Claudio Deiana (), Ludovica Giua and Roberto Nisticò ()
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Claudio Deiana: University of Essex

No 12872, IZA Discussion Papers from Institute of Labor Economics (IZA)

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.

Keywords: prescription opioids; drugs; opium price; supply-side economic incentives (search for similar items in EconPapers)
JEL-codes: I11 I12 I18 L65 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2019-12
New Economics Papers: this item is included in nep-hea
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