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Lethal Unemployment Bonuses? Substitution and Income Effects on Substance Abuse, 2020-21

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  • Casey B. Mulligan
Abstract
Marginal prices fell, and disposable incomes increased, for drug and alcohol consumers during the pandemic. Most of the amount, timing, and composition of the 240,000 deaths involving alcohol and drugs since early 2020 can be explained by income effects and category-specific price changes. For alcohol, the pandemic shifted consumption from bars and restaurants to homes, where marginal money prices are lower. For more dangerous illegal drugs like fentanyl and methamphetamine, the full price of consumption also significantly fell whenever employment became financially less attractive, as it was while unemployment bonuses were elevated. Both the wage effect and income effects further reduced marginal opioid prices by inducing shifts toward cheap fentanyl. Drug mortality dipped in the months between the $600 and $300 bonuses, especially for age groups participating most in UI. A corollary to this analysis is that national employment rates will be slow to recover due to the increased prevalence of alcohol and, especially, drug addiction.

Suggested Citation

  • Casey B. Mulligan, 2022. "Lethal Unemployment Bonuses? Substitution and Income Effects on Substance Abuse, 2020-21," NBER Working Papers 29719, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:29719
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    References listed on IDEAS

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    Cited by:

    1. Jeremy Greenwood & Nezih Guner & Karen A. Kopecky, 2022. "The Downward Spiral," NBER Working Papers 29764, National Bureau of Economic Research, Inc.
    2. Jeremy Greenwood & Nezih Guner & Karen A. Kopecky, 2022. "Substance Abuse during the Pandemic: Implications for Labor-Force Participation," Working Papers 1335, Barcelona School of Economics.
    3. Phil Kerpen & Stephen Moore & Casey B. Mulligan, 2022. "A Final Report Card on the States’ Response to COVID-19," NBER Working Papers 29928, National Bureau of Economic Research, Inc.
    4. Casey B. Mulligan & Robert D. Arnott, 2022. "Non-Covid Excess Deaths, 2020-21: Collateral Damage of Policy Choices?," NBER Working Papers 30104, National Bureau of Economic Research, Inc.
    5. Jeremy Greenwood & Nezih Guner & Karen A. Kopecky, 2022. "Did Substance Abuse during the Pandemic Reduce Labor Force Participation?," Policy Hub, Federal Reserve Bank of Atlanta, vol. 2022(5), May.

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    More about this item

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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