Pass or Fail: Economic Incentives to Reduce Salmonella Contamination in Ground Beef Sold to the National School Lunch Program

Ground beef sold to the USDA's Agricultural Marketing Service (AMS) for distribution to the National School Lunch Program (NSLP) must meet stringent food‐safety standards, specifically, a zero‐tolerance standard for Salmonella . We use a unique data set containing information on Salmonella levels in order to examine the sequential decisions of ground‐beef plants to become registered as AMS suppliers and then bid on contracts to supply the NSLP from 2006 to 2012. We find that plants exploit their competitive advantages in relatively high productivity and strong performance on Salmonella tests when choosing to bid on contracts in a given year. Furthermore, the incentives generated by the zero‐tolerance standard for Salmonella are highly effective: ground beef supplied to the NSLP is 21–22 percentage points more likely to meet a zero‐tolerance standard for Salmonella than ground beef tested as part of typical meat‐plant inspections.