Identifying the impact of the business cycle on drug-related harms in European countries

Abstract

The impact of economic factors on drug-related harms is difficult to predict, as different transmission mechanisms could operate simultaneously. Furthermore, this impact could be lagged in time and depend on the intensity of the economic shock. This study applies a timedynamic linear analysis, within the framework of threshold panel data models, to analyze the impact of business cycles on drug-related harms. Structural-breaks will be tested. Data for drug-related harms are gathered from 30 European countries, over the 2000-2020 period. The relationship between economic cycles (proxied by unemployment) and drug-related harms (proxied by overdose deaths) is pro-cyclical, despite a counter-cyclical component was identified during the 2008 economic recession. The model captures two effects: when unemployment rates are lower than the estimated thresholds, ranging from 3.92% to 4.12%, drug-related harms and unemployment have a pro-cyclical relationship.  However, when unemployment rates are higher than this threshold, this relationship becomes counter-cyclical.