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School Food Policy Affects Everyone: Retail Responses to the National School Lunch Program

Working paper #838
Jessie Handbury and Sarah Moshary

Abstract
We study the private market response to the National School Lunch Program, documenting economically meaningful spillovers to non-recipients. We focus on the Community Eligibility Provision (CEP), an expansion of the lunch program under the 2010 Healthy, Hunger-Free Kids Act. Under the CEP, participating schools offer free lunch to all students. We leverage both the staggered roll-out and eligibility criterion of the CEP, which is limited to schools where at least 40% of students participate in other means-tested welfare programs. We find that local adoption of CEP leads to a 10% decline in grocery sales at large retail chains. Retailers respond with chain-level price adjustments: chains with the most exposure
lower prices by 2.5% across all outlets in the years following adoption, so that the program’s welfare benefits propagate spatially. Using a stylized model of grocery demand, we estimate that by 2016 the indirect benefit had reduced grocery costs for the median household by approximately 4.5%.

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