Association for Public Policy Analysis & Management

Use and abuse of opioids is becoming major problem in many countries around the world. There is speculation that this increase is driven by poor labor market conditions--for example, Case and Deaton (2017) call drug overdoses "deaths of despair." However, there is little causal evidence to support that claim beyond correlations with local labor market conditions, in some cases using Bartik-style instruments. In this research, we use Danish register data to examine the effect of mass layoffs on laid off workers' use and abuse of opioids, as measured by opioid prescriptions, treatment for opioid abuse, and other outcomes. Because mass layoffs are likely unrelated to any individual worker's propensity to use opioids, this strategy allows us to identify the causal effect of a labor market shock on opioid use and abuse. We examine heterogeneity, including by labor market conditions at the time of the layoff. Using the rich Danish data, we can also observe spillovers in opioid use to family members and neighbors. Finally, we estimate how much opioid use and abuse can be explained by labor market conditions in Denmark and, extrapolating, in the United States.