Research / BFI Working PaperDec 05, 2019

Does Country-of-Origin Marketing Matter?

Xinyao Kong, Anita Rao

Firms often display product information on their front-of-package labels, with some firms going as far as to make deceptive claims. We study the impact of the “Made in USA” claim – a disclosure not legally required on consumer-packaged goods and yet a claim highlighted by many firms, sometimes deceptively, – on consumer demand. Leveraging the FTC’s investigation of four brands that resulted in removal of the claim from product packages, we study the impact such removal had on sales. We find a decline in demand following the removal of the “Made in USA” claim. Second, to ensure complete exogeneous variation, we conduct a field experiment on eBay, where we run over 900 auctions, varying only whether or not a product contains this country-of-origin information. We find consumers are willing to pay 28% more for the product when marketed as “Made in USA.” The experiments alongside observational data allow us to rationalize firms’ incentives in making deceptive country-of-origin claims.