The Opioid Epidemic and Consumer Credit Supply: Evidence from Credit Cards
Abstract
Using a unique dataset of unsolicited credit card offer mailings by banks to consumers, we investigate how opioid abuse affects consumer credit supply. To identify causal effects, we employ instrumental variables, propensity score matching, and contiguous counties techniques, and control for a battery of demand and supply factors and fixed effects. 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, andfewer rewards and reducing credit offers overall. Further analyses using the supervisory Federal Reserve Y-14M credit card dataset 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 that the opioid abuse-induced credit contraction has important social welfare implications: Local consumer spending significantly declines in the highly-affected areas.