JSIT19-01: The Effects of Opioids on Labor Market Outcomes and Use of Social Security Disability Insurance

Prescription opioids are widely used to treat pain. They can be beneficial by helping a person with a medical condition to manage pain and to be gainfully employed rather than seeking Social Security Disability Insurance (SSDI). On the other hand, opioids are addictive; their use may lead to substance abuse and an exit from the labor market. This paper investigates the effects of prescription opioids on labor market outcomes and the use of SSDI. Estimating the effects of prescription opioids is challenging because those prescribed opioids are likely to be different from those who were not, for example, in terms of their health conditions. To obtain causal estimates, I use marketing payments from opioid manufacturers and distributors to physicians as an instrument to predict opioid prescribing. I find that a higher opioid prescription rate has positive effects on labor market outcomes, although the effects are not precisely estimated. A higher opioid prescription rate also increases the use of SSDI. This result is puzzling because to apply for and continue receiving SSDI benefits, a person cannot work above the substantial gainful activity (SGA) threshold. This can be partially explained by the finding that a higher opioid prescription rate may increase both SSDI use and labor market activities through part-time employment.