School Breakfast and Lunch Costs: Are There Economies of Scale?

On a given school day, over 31 million lunches and 10.1 million breakfasts are served to children in participating American schools through the USDA National School Lunch and School Breakfast Programs. The United States Department of Agriculture reimburses schools for some or all of their costs. Reimbursement rates are based on an average meal cost, adjusted each year based on the national CPI for food away from home. There is no adjustment for school characteristics such as size, although there can be as much as a seven-fold difference in the number of meals served, from the smallest to largest schools. Yet, economists have shown that economies of scale exist in a variety of commercial and industrial settings. Thus, we use a multiproduct translog cost function to estimate the costs of school breakfasts and lunches. Results indicate substantial and persistent economies of scale across 21 locations for school breakfasts but few unexploited scale economies in school lunches.