Does Country-of-Origin Marketing Matter?

Abstract

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 that while products with the Made in USA claim have a slightly higher chance of drawing a zero valuation, such products obtain a 44% higher willingness-to-pay conditional on a positive valuation. However, this increased valuation is insufficient to economically justify firm relocation efforts. Auction transactions prices, on the other hand, are significantly and 28% higher with the claim suggesting resellers and auctioneers have incentives to display the claim. The experiments alongside observational data allow us to rationalize firms’ incentives in making deceptive country-of-origin claims.