Opioid Crisis Effects on Municipal Finance

Kimberly Cornaggia, John Hund, Giang Nguyen, Zihan Ye

Research output: Contribution to journalArticlepeer-review

9 Scopus citations


We investigate the effects of opioid abuse on municipal finance. We employ instrumental variables, border discontinuity difference-in-differences regressions, and coarsened exact matching to identify consistent causal effects, while controlling for variation in economic conditions and demographics. Opioid abuse lowers credit ratings, increases new offer yields, and reduces bond issuance. Reversal of these effects following effective antiopioid legislation further supports causality. Differential effects due to investor heterogeneity suggest that opioid abuse affects municipal finance through a capital supply channel. Overall, we conclude that local opioid abuse impedes municipalities' access to capital and thus hurts their ability to provide public services and infrastructure.

Original languageEnglish (US)
Pages (from-to)2019-2066
Number of pages48
JournalReview of Financial Studies
Issue number4
StatePublished - Apr 1 2022

All Science Journal Classification (ASJC) codes

  • Accounting
  • Finance
  • Economics and Econometrics


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