Food Banks and Retail Markups

Abstract

Food banks play a critical part in the food distribution system. In this paper, we examine the impact of food bank donations on retailer markups using a unique store-level data set on donations, labor employment, sales, and capital employment. We frame our empirical model of food bank donations and store-level markups in terms of a theoretical model of quality-based price discrimination and retail sales. We find that stores that donate more food to the local food bank are able to charge higher markups - 33% higher - after controlling for the well-known endogeneity problems that bedevil production analysis. Our findings suggest that donations are not necessarily only altruistic gestures on the part of retailers, but rather part of a symbiotic relationship between food banks and food retailers.

Keywords: Food banks, food retailing, markups, price discrimination, production economics

JEL Classification: D43, L13, M31