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

Author

Listed:
  • Claudio Deiana

    (Università di Cagliari and University of Essex)

  • Ludovica Giua

    (European Commission, DG Joint Research Centre, Unit I.1, Monitoring, Indicators & Impact Evaluation, Competence Centre on Microeconomic Evaluation (CC-ME))

  • Roberto Nisticò

    (Università di Napoli Federico II and CSEF)

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.

Suggested Citation

  • Claudio Deiana & Ludovica Giua & Roberto Nisticò, 2019. "The Economics Behind the Epidemic: Afghan Opium Price and Prescription Opioids in the US," CSEF Working Papers 525, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy, revised 13 May 2019.
    • Handle: RePEc:sef:csefwp:525
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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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