The Opioid Epidemic and Consumer Credit Supply: Evidence from Credit Cards

Using a unique data set of unsolicited credit card offer mailings by banks to consumers, we investigate how opioid abuse affects consumer credit supply in the U.S. To identify causal effects, we employ instrumental variables, propensity score matching, and contiguous counties techniques and control for varying local economic conditions and demographics. We find that banks contract credit supply to consumers in counties highly exposed to opioid abuse by offering higher interest rates, lower credit card limits, and fewer rewards and reducing credit offers overall. Further analyses using the supervisory Federal Reserve Y-14M credit card data set confirm these effects. What is more, the credit contraction disproportionately impacts riskier consumers, minorities (particularly Black people), low-income consumers, and younger individuals. Our examination of various state-level anti-opioid abuse legislation shows that opioid supply-oriented laws are somewhat helpful in curbing opioid overdoses or mitigating the credit supply contraction, but demand-oriented laws are not. Finally, we uncover the real effects associated with the opioid abuse-induced credit contraction: Local consumer spending significantly declines in the highly affected areas, with important macro-policy implications.