We show a negative effect of opioid prescriptions on subsequent individual employment among employers in our sample using doctor-opioid-prescribing propensity as our instrument. This finding has implications for firms that must now contend with lower local labor supply. We find a negative relationship between opioid prescriptions and subsequent establishment growth. However, firms respond to labor shortages by investing more in technology, replacing the relatively scarcer labor with capital, especially when they are not financially constrained. We find positive abnormal returns, upon the passage of state laws intended to limit opioid prescriptions, that are driven by firms more reliant on labor. (JEL J21, G31, 033)
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Ouimet et al. (2025) studied this question.
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