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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: Università di Cagliari and University of Essex

CSEF Working Papers from Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy

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, and that the magnitude of the effect increases with the county's ex-ante demand for opioids. Most of the increase involves natural and semi-synthetic but not fully synthetic opioids. We further find that both opioid-related deaths and drug-related crimes increase following a decline in the opium price. Finally, firm-level analysis reveals that the stock prices and profits of opioid producers react significantly to opium price shocks. Overall, the findings suggest that supply-side economic incentives 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)
New Economics Papers: this item is included in nep-hea
Date: 2019-03-15, Revised 2019-05-13
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