The Labor Supply Consequences of the Opioid Crisis

by David Powell

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An emerging literature considers the role of the opioid crisis on labor outcomes, suggesting that increased access to opioids may have led to decreased national labor supply. This paper uses the introduction of OxyContin and geographic variation in its launch to study the labor supply consequences of the opioid crisis. This geographic variation provides an opportunity to study lasting differences in labor supply across states with different exposure to the opioid crisis. This paper uses an event study framework but shows, theoretically and empirically, that a standard event study model with covariates can produce misleading evidence on both the existence of pre-existing trends and post-treatment effects. I implement a simple modification to this standard framework which permits consistent estimation. The results suggest that the opioid crisis played a meaningful role in reducing labor supply for the working-age population.

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