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

Author

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  • Deiana, Claudio

    () (University of Essex)

  • Giua, Ludovica

    () (European Commission, DG Joint Research Centre)

  • Nistico, Roberto

    () (University of Naples Federico II)

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.

Suggested Citation

  • Deiana, Claudio & Giua, Ludovica & Nistico, Roberto, 2019. "The Economics behind the Epidemic: Afghan Opium Price and Prescription Opioids in the US," IZA Discussion Papers 12872, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp12872
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    Cited by:

    1. Janet Currie & Hannes Schwandt, 2020. "The Opioid Epidemic Was Not Caused by Economic Distress But by Factors that Could be More Rapidly Addressed," NBER Working Papers 27544, National Bureau of Economic Research, Inc.

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    More about this item

    Keywords

    prescription opioids; drugs; opium price; supply-side economic incentives;
    All these keywords.

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • L65 - Industrial Organization - - Industry Studies: Manufacturing - - - Chemicals; Rubber; Drugs; Biotechnology; Plastics

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