Is the Rise in Illicit Opioids Affecting Labor Supply and Disability Claiming Rates?

Abstract

There is considerable interest in understanding the broader effects of the opioid crisis on labor supply and social insurance programs in the United States. This paper examines how the recent transition of the opioid crisis from prescription opioids to more prevalent misuse of illicit opioids, such as heroin and fentanyl, altered labor supply behavior and disability insurance claiming rates. We exploit differential geographic exposure to the reformulation of OxyContin, the largest reduction in access to abusable prescription opioids to date, to study the effects of substitution to illicit markets. We observe meaningful reductions in labor supply measured in terms of employment-to-population ratios, hours worked, and earnings. We also find significant increases in disability applications and beneficiaries. These labor supply and disability insurance shifts begin immediately after reformulation and are uniquely associated with pre-reformulation rates of OxyContin misuse, not rates of broader pain reliever misuse. Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.